Residential housing shortage is inevitable! Availability of the apartments is low and the prices are constantly rising.

Residential housing shortage is inevitable! Availability of the apartments is low and the prices are constantly rising.
For many years now, there has been talk of continuously growing selling prices of apartments due to the high demand and the lack of available residential housing. Unfortunately, the rental market is no exception. The Prague metropolis has been experiencing the lowest number of flats in the last eight years. The response to this market reaction is the constant rising of rental prices.
For many years now, there has been talk of continuously growing selling prices of apartments due to the high demand and the lack of available residential housing. Unfortunately, the rental market is no exception. The Prague metropolis has been experiencing the lowest number of flats in the last eight years. The response to this market reaction is the constant rising of rental prices.
Over the last two years, the availability of rental apartments has fallen by an extreme 69 percent, and is now well below the pre-pandemic level, during which it was heavily subsidized by short-term rentals.
Thus, the availability of rental housing has been decreasing every year, the demand has been steadily increasing, resulting in rising rental prices. Annually, prices have risen by up to eighteen per cent in the major cities, and the reason for this is none other than the huge demand for rental housing. Prices have equalized from the pandemic decline and are in some places even above pre-crash levels.
The prices per m2 of comparable apartments in similar regions are generally higher for smaller apartments than for larger ones. In České Budějovice, even a 2+1 apartment is more expensive per m2 than a 3+1 flat. Greater price differences between such flats are also in Prague, Brno and Hradec Králové.
The Deloitte portal and their Rent Index Q1 2022 report shows an average 2.4% increase in rental prices in Prague and regional cities in their analysis of the first quarter of this year. Tenants paid CZK 253 per square meter. The most expensive rents remain in Prague, only here the price per square meter exceeds CZK 300 (317 CZK/m2).
The rapid increase in demand for rental housing has several reasons. One of them is the selling prices of apartments. In the Czech Republic, you can pay up to CZK 90,000 per square meter for an average older apartment, and up to CZK 149,100 in Prague. The biggest price jump was recorded in flats in Prague 7, where the increase was 61% . Buyers paid CZK 216,300 per square meter, making this the most expensive district in Prague.
However, the rise in apartment prices is also accompanied by increasingly unaffordable mortgages, where the average mortgage rate has risen to 5 percent. The monthly payment of an average three-and-a-half million CZK mortgage has thus become more expensive by CZK 5,500 over this period. Mortgages have therefore become less affordable for the middle class.
Thanks to high prices, people are turning to the rental market. The refugee crisis, due to the current war in Ukraine is also a contributing factor to this. Therefore, we can continue to expect the price of rental housing to rise.
Currently, Prague is suffering from a housing shortage. It is unable to meet the growing demand, and although it plans to add and build new housing, it is possible that the Czech Republic will start to look more like the Western side. As a result, it would mean that it will become increasingly common to rent a property rather than own one. If the supply of rentals doesn’t expand, the demand will not keep up.
In Prague, rental prices are rising every day and will continue to rise. From an investor's point of view, buying a property makes more sense only as an investment.