Mortgages Are Getting More Expensive, Rents Are Soaring
In January 2019, banks approved the fewest mortgages in the past five years. The main reason is the Czech National Bank’s (ČNB) recommendation — followed by commercial banks — that the total monthly debt repayments must not exceed 45% of the borrower’s net monthly income. For an average net salary in Prague, the regular monthly payment should therefore not exceed CZK 12,000. At current property prices, that’s a serious problem — with an average income, you can hardly qualify for a mortgage (mostly only for small 1+kk flats).
Mortgage rates continue to rise. Since the beginning of 2019, commercial banks have been offering mortgages with interest rates starting at 3%, whereas two years earlier, they were available for less than half that rate.
Renting as the Logical Alternative
When a mortgage is not approved, renting often becomes the only option. But because demand for rental housing is enormous, rents in Prague have reached historic highs. According to developer company Trigema, the average monthly rent per square meter in Prague is CZK 340, and on Prague 1, it reaches CZK 433/m²/month. The most popular and rentable apartment type is 2+kk, averaging 57 m². The net rental income is therefore about CZK 19,500 per month, to which tenants must add operating costs of around CZK 3,000 per month.
Unsurprisingly, Prague has by far the most expensive rental housing, followed by Brno and Olomouc. The highest year-on-year increase was recorded in Hradec Králové (nearly +30%), while the lowest rents are found in the Ústí nad Labem region, where the average rent per square meter is CZK 148. For a 2+kk apartment of similar size, this means a monthly rent of roughly CZK 8,500.
It is worth noting that investing in rental property remains a very sound financial decision. In Prague, the yield on such an investment is between 4% and 5%, which means that a “tenant” effectively pays off your property in about 20–25 years.
And the reasons for high prices? The same as always — massive demand and limited supply, caused primarily by the slow issuance of building permits for new apartments.