Czechia's housing crisis is pushing more people into renting

Want to buy an apartment in the Czech capital? It'll now cost up to 16 average annual gross wages for a new 70-square-meter apartment in Prague, and the situation shows no signs of improving.

A recent survey by EU statistical arm Eurostat found that residential property prices in the Czech Republic increased by nearly 26 percent year-on-year last year, the highest among the EU-27 countries.

The housing crisis is having several other consequences according to new research: it's pushing many people to rent rather than buy, while the younger generation of Czechs is delaying starting a family. There's even evidence that people are leaving cities altogether.

In a survey conducted by Prague City Hall, which last week announced the launch of a pilot project to bring affordable housing to the middle class, over two-thirds of people living in the Czech Republic say the lack of available housing is reason enough to postpone starting a family, while 40 percent of the population is considering moving from Czech cities due to the housing crisis.

One-third of respondents anticipate that they will have to move out of the city due to the unavailability of housing. For 81 percent of Czechs, the unavailability of housing is an obstacle to having a child, and 69 percent said that they would postpone starting a family due to unavailable housing.

People who would normally buy flats are delaying the purchase, opting to rent instead, according to experts in the real estate industry experts.

"From long-term analyses of sales on the residential development market, we know that people aged 34 to 44, who often have at least one child, most often buy an apartment for their own living. And for them the prospects for buying a flat have significantly worsened," Pavel Linha from the analytical department of developer JRD Group told daily Deník.

The reduced availability of available and affordable apartments will significantly accelerate the demand for rental housing, which so far has been much weaker than in Western Europe, he added.

According to JRD Group, about one-quarter of Prague residents, some 340,830 people, are interested in rental housing. The largest group is student age people, at 41 percent, followed by single people and young couples, at 20 percent, families with children, at 15 percent, older couples with adult children, at 13 percent, and skilled foreign professionals at 11 percent.

Changes to mortgage regulations and rising interest rates are also pushing people into renting. “The monthly cost of a mortgage loan for an average Prague apartment currently exceeds the monthly rent for the same unit by 17 percent,” Linha adds.

An analysis by consultancy Deloitte shows that in the first quarter of 2022, the highest rent in the Czech Republic was in Prague, at CZK 317 per square meter per month, an increase of 5.3 percent compared to the fourth quarter of 2021. Rents were second-highest in Brno, at CZK 284 per square meter per month, an increase of 2.2 percent quarter on quarter. Rents went up in all major regional cities except České Budějovice, where it fell 0.9 percent to CZK 214 per square meter.

In Prague, the most expensive area is Prague 2, in the city center. The average rent per square meter there was CZK 372 per square meter, up 6.6 percent quarter on quarter. The second-highest rents were in Prague 1, at CZK 361, up 5.9 percent from the last quarter of 2021. The largest increase was in Prague 5, which jumped 9.1 percent to CZK 324 per square meter. The only district to see a drop was Prague 3, with fell 0.9 percent to CZK 328 per square meter.

Prague City Hall says that the housing crisis in Prague needs to be addressed urgently. Its Affordable Cooperative Housing project aims to help the middle class.

City Councilor Hana Kordová Marvanová said that many Praguers, even with a decent income, can no longer buy housing, and many of them then move away from the capital. She added that accelerated construction of new flats will not increase the availability of affordable housing that middle-class families can buy because investors buy up these new flats.

The Affordable Cooperative Housing project will create cooperation between the city and the private sector to make affordable flats on land provided by the city. The final price of housing will up to 30 percent lower than the market price. The first pilot project from the Prague 5 district will be located on Radlická Street and will be presented at the June meeting of the Prague Assembly.  

But in the short term, there are few options for middle-class families seeking to buy housing in urban areas.