The property price increase in the Czech Republic is the fastest in the European Union, according to Jiří Rusnok, the governor of the Czech National Bank (ČNB).
In the Czech Republic, average prices of apartments have risen by more than 40 percent since 2010; the increase occurred mainly in the past two years. Specifically, in Prague, one can afford to buy only 0.37 square metres of an apartment from an average monthly wage. For comparison: the situation in Paris is corresponding (0.39 square metres), but the other end of the chart shows Vienna (0.58 square metres), Estonia’s Tallinn, (0.60 square metres), Berlin (0.61 square metres) or Rome (0.83 square metres).
Good economic situation and extremely easily available mortgages have created room for mass buying. In Prague, these factors were joined by a recent rent deregulation and significant administrative obstacles for real estate developers of new projects that even forced some foreign investors to leave the market. Another factor is shared economy and apartment rentals for tourists – especially in the centre of Prague – via platforms like Airbnb.
Airbnb alone is annually used by more than 600.000 tourists, which causes the profits from apartment rentals to surge. Therefore, centrally located apartments are even more attractive for investors.
What can be done about this situation? ČNB has recently restricted the availability of 100 percent mortgages, hoping for a decrease in demand for apartments. However, the effect of this step will probably be weak.