Czechs Face Europe’s Longest Wait to Buy a Home

Buying a home is increasingly difficult for Czechs. High mortgage rates and rising house prices complicate the situation.

Last year, the Czech Republic dropped in the international rankings, making domestic housing the least affordable in Europe.

“The affordability of owning a home in the Czech Republic remains poor and it doesn’t look like it will change yet,” said Miroslav Linhart, a senior partner in Deloitte’s financial advisory department.

Deloitte’s Property Index survey calculates the average income and the cost of a new 70-square-meter apartment. In the Czech Republic, it takes 13.3 annual salaries to buy such an apartment, the same as last year.

The Czech Republic now ranks alongside Slovakia, where people need to save for 12.7 years. In contrast, in Denmark and Norway, it takes less than five annual salaries to buy a home.

Among cities, Amsterdam is the toughest for purchasing a flat, requiring around 15 years’ wages. Prague is the second most expensive, where buyers need 13.5 years’ worth of savings.

Renting Instead of Owning

Expensive housing particularly affects young people, according to Martin Lux, a sociologist at the Institute of Sociology of the Academy of Sciences. “Many young people live in rented accommodation or stay with their parents. Without intergenerational assistance, only a third could afford their own housing,” Lux said.

The trend of renting is increasing. Nearly a quarter of the population now lives in rented accommodation, up from a fifth previously. This demand is driving up rents. In the second quarter, the average rent was CZK 305 per square meter per month. For a 70-square-meter flat, this means paying CZK 21,350 monthly, an 8.5% increase from last year.

Unaffordable housing is also a concern for large cities, impacting their ability to attract necessary workers. Prague plans to build several thousand urban rental flats with preferential rents to address this issue.

Steps Toward Affordability

Linhart from Deloitte suggests that faster construction by commercial developers could make housing more affordable. Simplifying building regulations and permits would help achieve this. The new construction law aims to speed up permitting, but issues with digitalization have raised concerns about potential delays.

Last year, the Czech Republic was in the European average for construction speed, but it has slowed this year. The Czech Statistical Office reported that 17,230 flats were started in the first half of the year, a 5% decrease from the previous year.

Greater availability of mortgages, which are currently expensive, could also help. Linhart supports more development projects aimed at affordable housing, noting that private developers are only marginally involved.

Rising Prices

The Czech National Bank predicted that home affordability would improve this year as wages rise faster than housing prices. However, strong demand for owner-occupied housing is pushing prices up faster than expected.

In the first quarter of this year, the average price for an apartment was CZK 99,300 per square meter, making a 70-square-meter flat cost nearly seven million crowns. This represents a 4% increase in the first three months of this year. The CNB had forecasted a 5% rise for the entire year.

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