Every third new flat is now bought by an investor
Many factors shape the property market. For a detailed analysis of how cheaper mortgages are changing the Czech housing market, see our recent article. In the FLAT SERVICE Advisor we also keep you up to date on what is happening in the capital, where property prices are now breaking records. In 2024, prices of new flats in Prague reached an all-time high – you can read here just how high the average sale price per square metre was. According to experts, investors will significantly shape the property market this year. They withdrew during the Covid-19 pandemic, which was followed by a period of inflation and high interest rates caused, among other things, by the outbreak of the war in Ukraine, the related influx of refugees and the energy crisis. Now investors are becoming active again and such purchases account for roughly a third of all sales of new flats in this country. The return of individual investors to the market is likely to affect the availability of owner-occupied housing in the Czech Republic. Buyers are also struggling with the limited supply of flats in new developments, something that deregulation would help considerably. In Prague, for example, construction began last year on roughly 7 thousand new flats, yet experts estimate that at least 10 thousand would be needed to satisfy demand.
The slow pace of construction is holding back the development of our property market. Because of the lengthy permit process, developers are unable to meet the strong demand for housing
Property as an attractive investment
Putting spare funds into buying a property to rent out is considered one of the safest forms of investment. In purely mathematical terms, the return on a smaller flat in Prague is around 4% a year, while larger flats yield roughly 3%. Besides the expected rental income, it is worth considering other factors when buying an investment property, such as the potential for long-term appreciation when choosing a quality development in an attractive location. If retail investors buy a flat using their own funds, rental income can be an attractive alternative to savings accounts, for instance, which currently offer very low returns. Recently, more and more clients of development companies have been buying investment flats with the help of a mortgage. Now that interest rates have fallen to an acceptable level, it makes more sense from an investment perspective to buy several smaller flats on a mortgage than a single one with savings. According to recently published data, buying a property to rent out pays off best in Lithuania within Europe. If you would like to know why that is, and how the Czech Republic compares with other European countries, read the related article in the FLAT SERVICE Advisor.
Huge interest in rental housing
In Prague, not only are sale prices of flats rising, but so are rents for flats of every layout. In the first quarter of 2025, rents in the capital rose by an average of 3.1% compared with the previous three months. However, there are significant differences between individual city districts, which we described on our blog. Although the amounts paid out each month for living in rental housing are rising, interest in this type of accommodation remains huge and landlords receive many replies to every advertisement for a vacant flat. This situation is making investors more willing to buy flats even at higher prices. In the capital, only a minimum of investment flats remain empty and a model known as Build to Rent is gradually gaining ground. You can find out more here about this trend and institutional investors. Are you one of the investors who have added a flat in Prague or the surrounding area to their portfolio? At FLAT SERVICE we offer clients professional property management, so they never have to worry about renting out at all. Contact us at sales@flatservice.cz or on +420 277 000 330 and we will be happy to explain how our Partner and Garant services work, including secure collection of monthly rent and handling of the related administration, maintenance and cleaning.
