PRAGUE REAL ESTATE MARKET 2025: OPPORTUNITIES AND CHALLENGES FOR BUYERS AND FOREIGNERS

The real estate market in Prague and more broadly in the Czech Republic is currently one of the most challenging in Europe for those looking to buy a home. A clear mismatch between average wages and property prices is making homeownership an increasingly distant goal for both Czech citizens and expatriates. According to data from the Czech Statistical Office, housing prices rose between 10% and 15% in 2024, with further increases expected in 2025. As of today, purchasing an average apartment in Prague requires nearly 15 years of gross annual salary. In this context, buying a home is not just a significant economic decision; it is becoming a true luxury, with notable consequences for the rental market, which is becoming increasingly congested as more people cannot afford ownership.

Falling Interest Rates: A Temporary Opportunity

Despite high property prices, the current economic climate does offer a silver lining: falling interest rates. After peaking at 7% in 2022, the benchmark interest rate set by the Czech National Bank (CNB) has been gradually reduced, reaching 3.5% as of May 2025 the lowest level since 2021. This downward trend has also affected mortgage rates, which, according to the Swiss Life Hypoindex survey, currently stand at around 4.96%, a sharp decline from 6.3% two years ago. Experts forecast a further drop to 4.6% by the end of 2025. This environment could represent an ideal window to take out a new mortgage or refinance an existing one before the market reacts with another surge in property prices driven by increased demand.

Strategic Timing and New Lending Rules

Beyond economic trends, timing can significantly influence the conditions buyers can secure. Industry experts consider the period between April and September to be the high season, when demand rises, and so do prices. Buyers looking to save money might consider purchasing between October and March, when the market tends to slow and negotiations become more favourable. Further complicating the outlook are upcoming legislative changes expected in 2025. An update to the Consumer Credit Act will allow banks to impose higher penalties for early mortgage repayment during fixed-rate periods up to 100% of the outstanding balance. However, the new law will also offer clearer guidelines on how to repay without penalties at the end of the fixed-rate term. Those signing a mortgage today will need to carefully consider the duration of the fixed rate and the possibility of future refinancing.

Mortgages for Expats: What You Need to Know

For expatriates looking to buy a home in the Czech Republic, obtaining a mortgage comes with specific conditions. Generally, buyers under 36 years of age can secure a mortgage with a 10% down payment, while those over 36 are required to put down at least 20%. Non-EU citizens without permanent residence must provide a minimum down payment of 15%, regardless of age. Permanent residency, however, is not mandatory; holding a temporary residence permit or a valid employment contract in the Czech Republic is usually sufficient. For self-employed individuals, being a Czech tax resident is essential, as income declared abroad is typically not considered. Working with a local mortgage broker can make a crucial difference. These professionals can negotiate better terms, compare bank offers, and handle the necessary paperwork, saving clients time, stress, and the risk of costly mistakes.

Conclusion: An Opportunity That Requires Careful Consideration

2025 could present a pivotal opportunity to purchase property or refinance a mortgage in the Czech Republic, but acting wisely is essential. While falling interest rates are making credit more accessible, rising property prices and new early repayment rules may complicate decision-making for many buyers. For this reason, it is highly recommended to evaluate the timing of a purchase, the mortgage conditions, and the market’s development carefully, ideally with the support of a financial advisor or mortgage broker. Favourable conditions may not last, and the window for striking a good deal is narrowing. In today’s dynamic and competitive environment, speed and preparation can make the difference between a sustainable investment and a missed opportunity.

Sources: https://www.expats.cz/