The Czech real estate market is one of the most dynamic segments of the domestic economy. Although it is often discussed only in relation to housing prices, its actual form is much more complex - it includes ownership structure, regional differences, supply and demand development and the impact of mortgage policy. So what is the composition of the real estate market in the Czech Republic, where is the most traded and what factors determine it?
The Czech real estate market is typically dominated by owner-occupied housing. Approximately 80% of households live in their own homes, while the rental segment remains smaller and largely unregulated.
This historical model has its roots in the transformation of the 1990s, when the housing stock of the time was extensively privatised. Therefore, the majority of apartments today change hands through the secondary market, while new-builds form a smaller but price-dominant part of the residential market.
The size of the market can be described in several ways - by the number of transactions, the value of sales or the intensity of construction. Approximately 70,000 to 80,000 residential properties are sold in the Czech Republic annually, with about two-thirds being apartments and one-third of sales regularly being single-family houses.
In the last two decades, the real estate market has been developing very dynamically - it has been reacting to the development of interest rates, economic growth and the availability of mortgages. Between 2020 and 2021, extreme demand dominated, culminating in early 2022 when the market was completely sold out and demand significantly outstripped supply. This was replaced by a sharp cooling following the CNB rate hike and tightening of the LTV and DSTI limits. However, the market stalled at a point when there was hardly anything to offer, so even the sharp drop in demand did not immediately lead to a reduction in prices.
The Czech real estate market is strongly concentrated in two metropolises - Prague and Brno. Prague has long absorbed more than a third of all development projects and the majority of investments in new housing. The Prague market is driven on the one hand by a growing population and interest in property ownership by residents, and on the other hand by high return on investment for developers.
The rest of the Czech Republic has a more limited volume of transactions and a lower pace of construction, but the growing interest in regional projects points to a gradual expansion of residential activity outside the largest cities.
On the other hand, other markets are very active in the area of older construction, especially flats in prefabricated buildings. For example, in the Ústí nad Labem region, a larger number of prefabricated flats have been traded for a long time than in the capital.
The Czech market has been in imbalance for a long time - demand exceeds supply, especially in Prague and Brno, and the problem is on the side of insufficient supply.
The reasons are mainly structural: the lack of available land, the low pace of construction, but primarily the very long permitting processes that slow down development and allow almost no strategic planning of construction.
The long-standing construction deficit in both metropolises is the main reason for the continuous rise in prices.
The commercial and residential parts of the market are fundamentally different. While the office and industrial segment is dominated by institutional investors with long-term capital, the residential market in the Czech Republic remains the domain of households and smaller private investors. Since the residential segment, especially the market for older apartments, is primarily a market for the general public, its behaviour is often far less predictable, more sensitive to changes in interest rates and credit availability, and has a greater social impact.
In recent years, more Build-to-Rent (BTR ) projects - professionally managed rental houses owned by investors - have started to appear in the Czech Republic.
It is a response to the growing unavailability of owner-occupied housing and an effort to professionalize the rental segment. Compared to the classic "for sale" construction, however, the developer's return on investment in this case is many times longer - while the horizon for a classic sale may be only a few years, the BTR assumes a horizon of 20 to 30 years.
BTR projects can help stabilize the rental market in the future, especially in Prague and Brno, where demand for quality rental housing is highest.
According to analyses by Flat Zone, it has long been the case that the Czech Republic, and especially the larger cities, are building fewer flats than would be consistent with demographic development and simple reproduction of the housing stock.
The pace of construction has lagged behind since the late 1980s and administrative permitting processes take the longest in the EU by international comparison.
Over the last 30 years, we have accumulated a long-term deficit in the construction of new flats in the order of tens of thousands of flats in Prague alone.
The lack of permitting is then reflected in future supply. The current deficit thus accumulated is estimated at between 30,000 and 50,000 dwellings in the capital.
One of the biggest risks of market perception is short-term memory. We live in a fast-paced era, so what matters most to us is what is happening now, or what has accompanied the very recent past.
But to understand the real situation, it is necessary to look at the long-term relationships between supply, demand, rates and demographics.
Flat Zone works with many indicators in its analyses. The main ones include:
1️⃣ offer of apartments and its length,
2️⃣ mortgage rate trends,
3️⃣ number of permits issued and construction started,
4️⃣ demographic change and migration,
5️⃣ ratio of house prices to household incomes.
In the long term, the market will be influenced primarily by the availability of financing and the pace of construction. The only sensible solution is the thoughtful construction of new apartments in large cities, where there is a long-term shortage.
On the other hand, the supply in smaller towns could also be affected by demographic developments. According to the data Flat Zone analysis from 2025 there are currently more than 360,000 (i.e. more than 19%) flats in the Czech Republic owned by people over the age of 70.