Buying real estate in the Czech Republic is not an easy task, not because of the buying process but because of the prices. This is especially true for Prague: the general trend suggests that real estate in the capital is not going to become affordable. The average price of a square meter in a new building is now: €6.1 thousand; on the secondary: €5 thousand. 

High prices for residential properties in Prague contribute to the following factors: 

1. Long-term shortage of housing

One of the main reasons for the rapid rise in real estate prices in Prague is a prolonged housing shortage. The city faces a complex and lengthy process of obtaining building permits, which prevents developers from increasing the volume of housing. 

For example, the latest available data for 2020 ranked the Czech Republic 157th in the world in terms of ease of obtaining construction licenses (source: Doing Business Report). And despite the recent simplifications in the building code that aim to address this problem, the expected effect may only become apparent in a few years.

2. Impact of last year's problems

The coincidence of the energy crisis, inflation, and rising construction costs last year was a real challenge for the Prague real estate market. Developers cannot adjust prices due to these external factors. Consequently, property owners on the secondary market are also following suit.

3. Prague as an epicenter

As the largest city in the Czech Republic, Prague is essentially the country's only metropolitan area. It is home to the most coveted employment opportunities, attracting thousands of Czechs and immigrants each year. The influx of residents combined with a limited supply of housing exacerbates the gap between supply and demand. This imbalance acts as a significant factor in rising real estate prices.

In terms of projections, Knight Frank's analysis examined the mortgage lending situation and found that the average loan size is around 5.85 million crowns for a 25-year repayment term. Despite rising rental values in most areas, the company expects a significant increase in rental volumes due to the limited supply of housing.