Prague Is Expensive — You Need CZK 50,000 per Month for Your Own Apartment
In all regional capitals of the Czech Republic, an average regional monthly income is usually sufficient to obtain mortgage approval. The only exception is the capital city, Prague. Commercial banks comply with another recommendation from the Czech National Bank (ČNB), which concerns the DSTI (Debt Service to Income) ratio — the ratio of a borrower’s debt payments to their net income. Since June 2017, banks should not approve mortgage applications if the borrower’s total monthly debt exceeds 40% of their net monthly income. Total debts include not only the monthly mortgage payment but also other liabilities such as leasing payments or other loans.
In the case of a family apartment in Prague (a 3+kk flat with an area of 75 m²), it is necessary to have:
A) at least CZK 1,000,000 in savings (since April 2017, banks generally lend up to 80% of the property value, while the average price per square meter in Prague is around CZK 75,000), and
B) a net monthly income of at least CZK 50,000 (based on a 20-year mortgage at a 2% interest rate and a DSTI of 40% — right at the approval threshold for most banks).
Buyers must also pay a 4% real estate acquisition tax (except for newly built properties, which are exempt).
Number of Approved Mortgages Has Decreased
Due to the ČNB’s interventions mentioned above, the number of approved mortgage loans has decreased. In July of this year, Prague recorded the lowest number of approved mortgages in the past five years. The decline is also linked to a lack of available housing. Bureaucratic delays in the building permit process are a major contributing factor.
As a result, there is a significant shortage of apartments, and their prices continue to rise. Currently, there are 22 building authorities operating in Prague, and developers are calling for their centralization. The ideal solution would be one executive and one appellate construction authority. The average duration of a development project — from land acquisition to the first residents moving in — is approximately 10 years, making the Czech Republic one of the slowest countries in Europe when it comes to construction permitting.