What is the real housing affordability in the Czech Republic?

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The optimism caused by falling interest rates is dampened by actual data.

Housing affordability is a key indicator that the dynamics of the whole real estate market depends on. It is influenced by three essential parameters:

  • prices of flats
  • net income of households
  • average mortgage rates

While the years 2010–2020 were a “golden era” of housing affordability, since 2021 there has been a very dynamic development of all the three parameters.

In January 2009, the housing affordability index reached 50.9%, which means that a household in an average flat spent more than a half of its net income on housing. At that time, the mortgage rate was 5.62% and the average price of flats was CZK 2.11 million.

In 2010–2020 the real estate market had its best time ever. Households spent about 35–45% of their net income on housing, the average price of flats was around CZK 4 million and the mortgage rate was between 1.5% and 3%.

However, in 2021 things started to be completely different. The prices of properties soared and so did mortgage rates. At the end of 2022, the housing affordability index rose to an unbelievable 71%, with mortgage rates reaching 6.3% on average and average prices of flats being around CZK 4.7 million.

After the pressure of inflation has decreased and the interest rates have been corrected by the Czech National Bank, the index is now 59.4%, which means a significant drop, but it is still much higher than in 2010–2020. That is one of the reasons why the number of mortgages granted every month is increasing very slowly.


The three indicators show that by the end of the year, mortgage rates should drop to 4.5%–5% with salaries increasing by 5.6%. However, prices of flats do not offer a positive outlook. A 5% increase can be expected but it may be even more dynamic. The reason is the excess of demand over supply. So, the housing affordability index should be approximately 55% at the end of the year.

Next year, mortgage rates are expected to fall under 4% while salaries are likely to increase by about 5%. However, prices of properties will continue to rise. With this trend, the housing affordability index will be approximately 50% at the end of 2025, which is roughly the same figure as in 2009.

Do you need advice regarding new housing?

Do not hesitate to contact us: +420 602 544 858; info@philip-frank.cz

Source: https://golemfinance.cz/…-tvrda-data/

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