Renting is three times cheaper than a mortgage in Prague

Skyrocketing real estate prices are making renting a more affordable option than taking out a mortgage in Prague and Brno, ČTK reports, citing UlovDomov.cz.

The site has compiled an index comparing monthly rent payments with mortgage payments at current rates and prices per square meter. It's worth keeping in mind that the index does not factor in the initial cost of the loan, or the fact that mortgages mean investing additional money into one's property.

For instance, a 2+kk apartment, which is the most popular type of apartment in Prague, has a value of 3.2 in the index, meaning that paying the rent can be more than three times cheaper than the loan repayment. 

Director of UlovDomov.cz Michal Hrbatý noted that 3.2 is a market extreme and that apartments outside the Prague city center have a lower value in the index; an apartment in Prague 4 would have an index of 2.3, he added.

The situation is similar in Brno, where the rent for a 2+kk apartment is less than CZK 15,000, while the index of UlovDomov.cz is 2. At the other end of the scale stands Ostrava, which has the lowest indices, and where a 3+kk apartment has a value of 1.4. In Olomouc, a 1+kk apartment has an index of 1.6. 

Rental prices have been spiraling due to the unaffordable costs of mortgages, a trend that could in turn determine developers to focus more on the rental market, which is still not full developed in the Czech Republic, says Petr Dufek, chief economist of Banka Creditas.

Still, this doesn't mean that the interest in being a homeowner is on the wane in the Czech Republic, euro.cz reports. "The interest in owning a family home is still strong and this year the construction of family homes will again be around last year's level," believes Peter Markovič, who is the Czechia and Slovakia CEO for Xella, a company that develops, manufactures and markets building and insulation materials.

Data from the Czech Statistical Office shows that people are most interested in purchasing an apartment in a brick building, and least interested in purchasing one in a Communist-era building made out of prefabricated materials, a.k.a, a "paneláky."