Petr Michal: The city alone cannot provide enough affordable housing; it must cooperate.

The Czech National Bank announced in mid-June that apartment prices are now overvalued by approximately 40 percent compared to the income levels of the median household and the required rental yields. In its previous financial stability report six months earlier, the central bank had reported an overvaluation that was 15 percentage points lower. This pricing situation aligns with the results of a May survey conducted by the STEM agency for the Prague Chamber of Commerce, which sampled 505 respondents.

The survey revealed that for nearly half of the respondents, an affordable apartment would have a size between 50 and 80 square meters. According to a study by the real estate group European Housing Services (EHS), which uses data from its founding members—real estate services Bezrealitky and Maxima Reality—the average price of an older apartment in the Czech Republic exceeded 90,000 CZK per square meter for the first time in the first quarter. In Prague, however, an older apartment already costs more than 120,000 CZK per square meter. A new apartment in Prague in the first quarter of this year cost approximately 145,000 CZK per square meter, according to an analysis by developers Trigema, Skanska Reality, and Central Group.

Given the significant gap between what Czech residents can afford and the prices of both new and older housing, it is clear that rental housing is becoming increasingly important. However, there is also a shortage of rental units—especially now that the tourist season is restarting without COVID restrictions, making short-term rentals via services like Airbnb lucrative again in major Czech cities.

This commentary was published on July 26, 2022, on the E15 website. More here.