A Prague apartment now costs eight annual household salaries

New findings show that it takes an average of five annual household incomes to purchase an average-sized apartment of 60 square meters in Czechia. However, this amount varies by location, with Prague and Brno requiring eight and seven annual salaries respectively. 

According to consulting firm Deloitte, in the first quarter of this year, the average price per square meter in a Czech apartment was around CZK 99,300. This means that an apartment of 60 square meters would cost about CZK 6 million. The average gross monthly salary in the country was CZK 43,941; it would therefore take 11.4 annual wages to purchase an apartment.

Data from the Czech Ministry of Regional Development shows that in the first quarter of this year, tenants spent a quarter of their income on housing, with roughly 13 percent of households facing “excessive housing expenses.” 

According to Deloitte, Prague is the second-least affordable city in Europe when it comes to purchasing your own new apartment. On average, 13.5 annual wages are needed to buy an apartment in a new building in Prague.

A report from European media outlet Politico from earlier this year also outlined how, on average, Czech apartment prices surged 50 percent over the past five years, while rents increased 30 percent. Concurrently, nominal wages rose by 21 percent, but real wages – adjusted for inflation – plummeted 15 percent. 

Minister for Regional Development Ivan Bartoš, stated that the government is working to address housing issues, with a focus on affordable housing. "One of the goals is to start investing in affordable housing...some data should be available to the state for the first time," Bartoš said.

However, the ministry is facing potential budget cuts in its affordable housing program. Bartoš has stated that the government is discussing increasing investments in the construction of municipal rental apartments by seven billion crowns. According to the draft of the state budget, the ministry's expenses are expected to decrease by almost 13 percent, the largest decrease among all ministries.

The program, supported by the State Investment Support Fund, provides subsidies and favorable loans for the construction of rental apartments. As of now, the program has supported the construction of 4,688 apartments, with 1,237 already completed. The total costs for subsidies and loans currently stand at CZK 2.44 billion.

A recent, separate survey by MindBridge Consulting also reveals a significant shift in attitudes toward home ownership among Czechs over the past five years, due to rising property prices. In 2019, nearly 75 percent of people believed that living in their own home was definitely more advantageous, but that number has dropped to 43 percent today. Younger generations show the least support for owning a home. 

The perception of renting as a more favorable long-term living option has risen from just 3 percent in 2019 to nearly 12 percent today.

An analysis earlier this year by the Czech Rental Association (ANB) found that it expected “thousands more renters” on the housing market in the capital this year. Due to the skyrocketing rental prices, the ANB has also observed that more people are opting to move to the outskirts of major cities – such as to towns in Central Bohemia – to save money on rent.

However, a recent decision from the Czech National Bank to reduce its base interest rate by half a percentage point, to 5.75 percent, will likely trigger a decline in mortgage rates and most likely stimulate an increase in property purchase.

Analysts expect apartment price growth of around 5 percent in the capital this year and slightly lower rates in other Czech regions. The current price of an apartment per square meter (m²) in Prague is CZK 152,000; a 60 m² apartment costs CZK 9.1 million currently.