Monthly mortgage payments 50 percent more expensive than rent in Czechia

Despite mortgage rates falling and home ownership in Czechia becoming cheaper in recent months, renting still remains the firm favorite. Staff ČTK

Written by StaffČTK Published on 10.01.2024 10:17:00 (updated on 16.01.2024) Reading time: 2 minutes

A new study by the Rental Housing Association (ANB) has found that the average monthly mortgage payment for a 53-square-meter-apartment is half as high as the cost of average monthly rent in Czechia. According to the ANB, renting remains more economically advantageous – and much more common – than owning housing, but the gap in cost between both is closing.

Rents rising, mortgage payments falling

The ANB writes that the current average monthly difference between renting a home and paying a mortgage is CZK 7,768. In 2022, the gap was as high as CZK 10,000. The majority of Czechs prefer to live in their own home, but often resort to renting due to it still being cheaper.

According to ANB member Jan Rafaj, renting will continue to dominate over home ownership in Czechia, despite mortgage payments becoming cheaper. He expects that about one-quarter of Czechs will live in rental accommodation by 2030. The number of institutional landlords, who manage hundreds or thousands of apartments, is also projected to increase significantly.

Renting remains more popular

One of the reasons why mortgages are still much less popular than renting is because of the persistently high mortgage rates imposed by the Czech National Bank (ČNB) in the past two years. A study released in October 2023 found that 80 percent of Czechs found it difficult to afford their own housing.

In fact, only this week that the average mortgage rate dropped below 6 percent – the first time it has done so in the last 18 months. With rates expected to further fall, experts assume that mortgage applications should increase in 2024. The ČNB’s decision to also make mortgages more accessible (by making application requirements less stringent) should also see a rise in home ownership.

In the first three quarters of 2023, apartment prices fell by around 6 percent year on year nationwide. On the other hand, in the third quarter of last year, the prices of rental housing increased by an average of 4.5 percent.

Despite the advantages of flexibility and lower financial burden, ANB Vice President Jakub Vysocký points out that rental housing does not create property value for tenants. Additionally, the lack of control over rent prices and the inclusion of additional service fees may be seen as negatives, tempting people into home ownership.

According to data from BTR Consulting, the average rent for a fully equipped rental apartment in Prague is CZK 534 per square meter (including all utility costs), which is significantly higher than the national average (which stands at about CZK 380).

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