To rent or buy in Czechia? In a price-shifted market, it’s complicated

In a shifting Czech real estate landscape, where property purchase prices are currently on a downward trajectory, the age-old question of whether to rent or buy takes on a new dimension.

Attempting to shed light on the question, new analyses examine the cost-effectiveness of buying an apartment with a mortgage versus renting one in the current Czech real estate market.

The real estate market, which previously experienced substantial price increases, has now been marked by falling prices. The decline – which saw apartment prices fall by between 10 to 15 percent nationwide year on year in the last quarter – is attributed to waning demand driven by high mortgage rates that are currently hovering around 6 percent.

Bezrealitky.cz spokesperson František Brož told ČT24 that a significant one-third of properties listed on advertising portals have witnessed price reductions, with discounts ranging from CZK 100,000 and upwards. 

Deloitte data confirms the trend, revealing that apartment prices have dipped for three consecutive quarters, with average property prices in April-June of this year dropping by 1.5 percent.

"I see the situation remaining unchanged in coming months," said Petr Hána, director of Deloitte's real estate and construction department. 

The most marked decreases were recorded in Zlín and Karlovy Vary; on the contrary, prices rose in Pardubice, Jihlava, and Ostrava. Prices in Prague declined by less than 1 percent quarter on quarter.

Meanwhile, in the past two years, rents in Prague have increased by between 20 and 25 percent. For example, average rents for a two-bedroom apartment in Prague rose an annual 4 percent in the last quarter, to around CZK 19,000 monthly.

Where does this price-shifted market leave those debating whether to rent or buy property in the Czech Republic?

An analysis by Czech publication Lidovky.cz examined the cost-effectiveness of buying an apartment with a mortgage versus renting one in the current Czech real estate market.

Calculating the price of an average Czech apartment, which is equivalent to 24 annual rents, the publication posed two hypothetical scenarios: buying an apartment with a mortgage and living in it for 20 years while saving the difference between rent and mortgage payments.

The analysis concluded that those who buy a property will likely end up with more assets in 20 years than renters for the same period of time due to the rapidly rising rents evidenced in the past decade across the country. In essence, monthly mortgage payments are cheaper than rental prices. However, there are risks to buying – such as interest rate spikes – that could threaten repayment ability.

Amid declining inflation, though, analysts expect the Czech National Bank to push down interest rates by the end of this year. This is likely to see home ownership grow as consumers seek to save money in the long run as rental costs surge.