Study shows that Prague has Europe's least-affordable housing

Although supply-and-demand issues predominate, a report from multiple housing associations encourages the government to do more to control prices. Staff ČTK

Written by StaffČTK Published on 27.03.2024 12:00:00 (updated on 27.03.2024) Reading time: 2 minutes

According to a comprehensive analysis by multiple non-profit housing organizations, Prague faces an unprecedented housing crisis and has Europe’s most unaffordable properties.

The analysis drew on data from European news site Politico, which revealed that people in Prague must earn 25 net annual average Czech salaries to purchase a 75-square-meter (m²) apartment in Prague – the highest rate in Europe.

Housing associations Arnika, Re-set, Platform for Social Housing, Tenants’ Initiative, and Tolerable Housing all wrote that Prague’s housing affordability crisis has deepened significantly in recent years. 

Sharp increases in property prices

The study also reports that apartment prices surged 50 percent over the past five years, while rents increased 30 percent. Concurrently, nominal wages rose by 21 percent, but real wages – adjusted for inflation – plummeted 15 percent. Rising prices have made it much more difficult to find properties to buy in Czechia, causing homeownership rates to fall sharply in the past decade.

The situation will likely worsen this year – although mortgage rates have been declining since the end of 2023, analysts believe that this will spur interest in buying property and, therefore, elevate asking prices by about 5 percent.

An alarming statistic from the report indicates that up to one-quarter of Prague households allocate more than 40 percent of their income to housing expenses. Director of the Platform for Social Housing Barbora Bírová emphasized the disproportionate impact on vulnerable groups, with approximately 160,000 Prague residents at risk of housing instability and inability to pay rent or mortgages.

According to the Deloitte Real Index, for the fourth quarter of last year, 1 m² of property sold for an average of CZK 121,700 in the capital. This is more than three times pricier than Czechia’s cheapest region for property, Ústí nad Labem.

"The rapid increase in housing costs was also as a result of the energy crisis in 2022," authors of the report noted.

Finding solutions

Recommendations outlined in the study urge policymakers to prioritize the expansion of Prague's public housing stock, currently comprising a mere 5 percent of the city’s apartments. The study also proposes measures such as progressive taxation on large property owners to curb speculation-driven price hikes.

The study also suggests regulating rental price increases, drawing inspiration from other European countries like Sweden.

Contrary to developer assertions that advocate for less strict construction laws (and the quicker issuance of building permits) to ease strain on the demand for housing in the capital, the analysis contends that enhancing supply alone won’t alleviate the crisis. 

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