Despite rising wages and decreasing interest rates, many Czechs are finding it increasingly difficult to afford homes. In Prague, even couples with average incomes are unable to purchase a three-room apartment under current conditions.
This issue is now spreading beyond the capital, as property prices continue to rise, making homeownership increasingly unattainable across the country.
Jan Gruby, head of the Czech branch of RE/MAX, noted that Prague apartments are now primarily affordable only for those with above-average incomes. “Mostly, these are high-paid managers, business owners, or foreigners who have jobs here,” he said in an interview with Novinky.
The affordability crisis is being felt nationwide. Current data reveals that the average income across the country is insufficient for a family to purchase an apartment in most regional cities. Despite the Czech National Bank lifting most restrictions in 2022, banks are still applying their own criteria when evaluating the creditworthiness of potential borrowers.
For instance, banks often check whether the monthly mortgage payment constitutes too large a percentage of an applicant’s net income. “Most banks keep this indicator at around 50-55 percent,” explained Milan Roček, managing director of Flat Zone, whose price charts are used by banks.
In practical terms, this means that to afford a 75-square-meter, three-room apartment in most regional cities with a 30-year mortgage covering 80% of the property’s price, a net monthly income of over 40,000 Czech crowns would be required. In Prague, the required income is even higher—over 87,000 crowns. The average net monthly salary at the end of last year was just under 39,000 crowns, making it difficult for many to meet bank requirements. In Prague, a couple would need to combine two average salaries to afford such an apartment, with the average salary in the capital standing at about 46,500 crowns.
These calculations are simplified and use average interest rates to provide a general understanding of the challenges in purchasing property.
Among the cities where it remains easier for individuals to buy a three-room apartment with an average salary are Karlovy Vary, Ústí nad Labem, and Ostrava. These cities are in structurally disadvantaged regions, where the economy is transitioning due to the decline of coal mining, and the demand for housing remains low, helping to curb price increases.
“The highest housing affordability is in regional cities on the periphery of people’s interests,” says Roček. The weaker demand in these areas helps limit price growth.
However, the outlook for affordable housing may worsen in the coming months, despite the continued decline in mortgage rates.
“The decrease in interest rates has a positive impact on household budgets, but this only partially, about two-thirds, compensates for the effect of the increased average mortgage amount,” explained Jaromír Šindel, chief economist of the Czech Banking Association.
The rise in property prices is expected to continue this year, with experts predicting fluctuations of 5-10%. As property values climb, homebuyers will continue to face significant challenges in securing affordable housing.
