After a period of stagnation or even a slight decline in real estate prices at the turn of 2022 and 2023, the current situation in the Prague housing market is significantly different. Apartments in the capital are once again becoming highly sought-after, leading to a significant increase in their prices. With falling interest rates and an overall improvement in people's economic situation, not only are prospective homebuyers returning to the already tight real estate market, but also speculative investors.

Is it still worth buying an apartment as an investment in Prague?

Here are several reasons why we believe it is:

→ Real estate prices will continue to rise and stabilize around 4.5% annually. The supply of properties is insufficient and is only increasing slowly (e.g., by utilizing brownfields such as Smíchov City, Rohan City, Rezidence Parková čtvrť, etc.). Combined with the still-high demand, which includes middle-class buyers purchasing apartments for their children or grandchildren, real estate investment funds, foreign clients, and rising energy and construction material costs, this clearly indicates that prices will continue to rise. And we’d rather not even mention the failed digitalization of the building permit process, which certainly doesn’t help either.

→ Rental prices are increasing. More and more people cannot afford their own property and are turning to rental housing. In Prague, rental prices have increased by nearly 5% in the past year. This is significantly influenced by the high number of refugees from Ukraine and the rapidly returning trend of short-term rentals.

→ Uninvested savings are losing value. Expected inflation is around 3%, meaning that 1 million CZK in a bank account at the beginning of the year will be worth approximately 700,000 CZK in ten years.

→ Interest rates are falling, and conditions for obtaining a mortgage are improving. The assessment of loan applicants is becoming more lenient (LTV, DTI, DSTI, LTI). The 2T repo rate is now 4.25%, the lowest level in the past three years, and mortgage rates are falling below the long-term average of 4.8%.

We recommend considering the purchase of a smaller apartment priced under 6 million CZK, which can be rented for an annual return of 228,000 CZK (19,000 CZK/month), representing a yield of approximately 3.8%. With an expected property price increase of 4.5% annually, the gross annual return reaches 8.3%, making it a suitable option for fighting inflation. At the same time, it can be viewed as securing future generations, for whom owning an apartment will become an increasing luxury.