Prague apartment prices fall to 2021 levels but rents continue to increase

Prices for buying an apartment have been falling across Czechia, especially for older flats, but rents in Prague and Brno are continuing to rise.

In the fourth quarter of last year, the average price for an apartment in Prague returned to levels similar to those at the end of 2021. Compared to the spring price increase, the average 65-square-meter apartment in Prague’s wider center lost almost CZK 680,000 in value, according to a study by the real estate group European Housing Services (EHS).

At the end of the first quarter of 2022, an apartment in Prague cost CZK 122,896 per square meter. By the fourth quarter of 2022, it fell to CZK 112,485 per square meter. Prices developed similarly in Brno, where the same apartment lost CZK 475,000 in value compared to its peak. The average price per square meter in Brno fell to CZK 87,902 per square meter at the end of the year.

Prices in Central Bohemia in the fourth quarter of 2022 fell to an average of CZK 70,543 per square meter from a high of CZK 76,966 in the first quarter. This confirms the increasingly strong connection with the trends in Prague.

Apartments in the Ústí nad Labem region were the cheapest at CZK 32,486 per square meter, of 4 percent less than in the third quarter. In the Karlovy Vary region, they sold for CZK 36,406 and in the Moravia-Silesia region for CZK 40,273 per square meter. Both regions saw a quarter-on-quarter decrease of 9 percent.

For the entire Czech Republic, the average price per square meter for an apartment at the end of 2022 was CZK 82,161, down from CZK 90,372 at the start of the year.

Apartment prices have been affected for the third quarter in a row by the declining purchasing power, high mortgage interest rates, the lack of institutional investors, and also a partially limited supply of owners who do not want to sell when sales prices fall, EHS stated.

EHS head Hendrik Meyer said the gap between prices for individual apartments is continuing to widen.

“Prices drop almost exclusively where the property has a deficiency – for example, a long driving distance, lacking renovation, or being in an energy-inefficient building. Prague and Brno apartments in good locations are still being sold today at similar prices as in the summer," Meyer said.

Meyer said it was not clear how long the decline in the real estate market would last. “So far, it seems that thanks to a warm winter and an averted energy crisis, the price drops will be significantly smaller than what was predicted in the autumn,” he said. Partial declines can be expected in the current quarter but stagnation will prevail.

“In the second half of spring, the market will take a breather and with it a significant turn may occur,” he added.

Regarding rents, the study said the number of people interested in each apartment decreased in the fourth quarter. In August an average of 39 people applied for one, at the end of the year it was 16. This is due to a larger number of properties available.

These were not only houses and apartments left by Ukrainian refugees returning to their homeland, but also renovated apartments, bought just before the tightening of mortgage loans in the spring of last year, the EHS report stated.

Due to this, rents stopped growing at such a fast pace or stagnated. Prague and Brno are exceptions to the trend, though. Rents in Prague rose by 4 percent in the fourth quarter compared to the third quarter, reaching CZK 334 per square meter. That comes to roughly CZK 21,500 per month for an average 65-square-meter apartment. In Brno, rents rose by 2 percent to CZK 282 per square meter or about CZK 18,500 per month for an average apartment.

In Ostrava, apartment rents fell by 5 percent to CZK 178 per square meter, with an average apartment going for CZK 11,500 per month.

The situation in Prague and Brno has been motivating new property owners to offer their apartments for rent. The number of households for which it is more economically advantageous to start renting out their large apartment and move to a smaller one is growing, the EHS report stated.

The EHS real estate group includes founding members Bezrealitky, Maxima Reality, and real estate trust Český nemovitostní trust. Other members are management company Tvůj Správce, the interior start-up Roomstory, the start-up Ownest, and real estate research firm Nemo Report.