Summary of the Residential Real Estate Market in the Czech Republic and Prague in 2025 and Outlook for 2026
2025 is shaping up to be the most significant turning point in the Czech real estate market in the last decade. After a period of relative stagnation and uncertainty that characterized 2022-2023, the market in Prague and major cities is experiencing a resurgence driven by a rare combination of macroeconomic and regulatory factors. The data in this article points to a market in a state of extreme imbalance between supply and demand.
The residential market in Prague is breaking new records, with prices for new apartments soaring to an average of approximately 175,000 CZK per sqm, and sales rates reaching their highest level in four years.
The Macroeconomic Engine – Return to Growth Amidst Rate Cuts
To understand the surge in real estate prices in 2025, one must first analyze the tectonic shift in the economic environment of the Czech Republic. The Czech economy, which was under heavy inflationary pressure in previous years, has undergone a “soft landing” process and impressive stabilization, fueling real estate prices.
Interest Rate Policy and Inflation: The End of the Expensive Money Era
The Czech National Bank (CNB) executed a consistent strategic move of lowering interest rates throughout 2024 and 2025. Central Bank data indicates that annual inflation in 2025 stabilized around 2.5%, with a forecast for a further decrease to 1.6% during 2026 – a figure below the official inflation target of 2%. This decline allowed the Central Bank to lower the Repo Rate from peak levels of 7% (in 2022) to levels that encourage risk-taking and renewed investment in real assets.
The impact on the mortgage market was dramatic and immediate, serving as the primary driver for the recovery on the demand side:
Key Financial Indicators
| Indicator | 2025 Data | 2026 Forecast | Trend and Significance |
| Annual Inflation | 2.5% | 1.6% | Drop below target allows for expansionary monetary policy. |
| Average Mortgage Rate | 4.49% | 3.8%-4.2% | Decrease from a peak of approx. 6-7% in 2023. A psychological trigger for buyers. |
| New Mortgage Volume | 321 Billion CZK | Increase of approx. 13% | 2025 was the second-best year in history. The public returns to the market. |
| GDP Growth | 2.6% | 2.9% | Acceleration in economic activity supports demand. |
The year 2025 saw a 41% jump in new mortgage volume compared to the previous year. Including refinancing, the market reached a volume of 406 billion CZK. This figure indicates that the Czech public, who “sat on the fence” during 2023-2024 waiting for rate cuts, returned to the market in full force once rates dropped below the psychological threshold of 5%.
Labor Market and Purchasing Power
The Czech economy further supports demand. Unemployment rates in the Czech Republic remain exceptionally low (approx. 2.8% in May 2025), creating job security that allows households to commit to long-term mortgages. Purchasing power in Prague, standing at €18,667 per capita, is 32% higher than the national average. This figure explains the widening gap between real estate prices in the capital versus the rest of the country, highlighting Prague’s status as an “island of wealth” within the Republic.
Transaction Analysis and Residential Prices in Prague
The residential real estate market in Prague in 2025 was characterized by a deep structural imbalance. While demand returned to peak-year levels, supply remained limited and constrained, pushing prices upward.
According to joint data from the three largest developers in the Czech Republic (Central Group, Skanska, Trigema), which serve as the most accurate market barometer, new apartment prices in Prague broke all previous records:
- Average Price: The average price per sqm in a new apartment reached approx. 175,200 CZK in Q4 2025. This is an increase of about 13% compared to the same period last year.
- Offer vs. Transaction Prices: The gap between the asking price and the closing price narrowed to a minimum. Actual transaction prices rose by approx. 10-11% throughout the year.
- The 10 Million Threshold: A standard 70 sqm apartment in Prague officially crossed the 10 million CZK mark, a figure representing a new status symbol for the cost of living in the capital.
Sales Volumes vs. Shrinking Supply
Despite high prices, demand for apartments did not cease but rather intensified.
- Sales Volume: In 2025, approximately 7,800 new apartments were sold in Prague, an 8% increase compared to 2024. This is the highest figure recorded since the exceptional year of 2021.
- Available Supply: Alongside the rise in sales, the inventory of available new apartments dropped by 10% during the year. As of the end of 2025, supply stands at only about 5,500 available units.
- The Structural Deficit: Analysts estimate that the Prague market requires 10,000 new housing units annually to stabilize prices. In practice, the construction pace is far from meeting this need, guaranteeing continued price pressure in the foreseeable future.
Second-Hand Market: The Gap Narrows
While the new apartment market grabs headlines, the second-hand market is experiencing a renaissance of its own. Prices of apartments in brick buildings rose by an impressive 24%, while prices of Panelak apartments (prefabricated communist-era construction) increased by 14%. This indicates that buyers, priced out of the expensive new apartment market, are turning to quality alternatives in the secondary market and are willing to pay a premium for renovated historical buildings.
Geographic Analysis – The Big Winners of 2025
The collected data reveals significant variance between Prague’s different districts. While the historical center maintains its prestige, real growth and high yields have migrated to the second and third rings. Below is a performance analysis table by district (2025 data).
| District | Typical Price Range (€/sqm) | Annual Price Change | Key Characteristics and Trends |
|---|---|---|---|
| Prague 1 (Old Town) | 8,650 – 9,650 | 0.3% (Stability) | Luxury assets. Market is saturated and very expensive; price stagnation is due to an affordability ceiling. |
| Prague 2 (Vinohrady) | 8,250 – 9,450 | +24% | Peak demand for luxury living. The most sought-after neighborhood for the upper class. |
| Prague 3 (Zizkov) | 7,000 – 8,000 | +20% | The Rising Star. Accelerated gentrification, new projects. |
| Prague 7 | 6,800 – 7,800 | +28% | Sharpest increase. Transformation from an industrial district to Prague’s trendiest area. |
| Prague 8 (Karlin) | 6,400 – 7,400 | +11% | Modern business hub. Stable and highly sought after by tech workers and expats. |
| Prague 4 (Pankrac/Nusle | 5,550 – 6,600 | +20.6% | Strong growth due to infrastructure improvements (Metro D) and proximity to employment centers. |
| Prague 9 | 5,350 – 6,400 | +12.9% | Main focus of massive new construction. Most affordable prices relatively, attracting investors and young couples. |
Spotlight on Prague 3 and 7:
- Prague 7 (Holesovice): Recording the sharpest annual leap (over 28%). The reason is the completion of massive mixed-use projects, led by Port7 (acquired by AFI Europe), which changed the skyline and brought a strong population of corporate employees to the area. Prices in this area crossed the 223,000 CZK per sqm mark in select projects.
- Prague 3 (Zizkov): Emerging as the most interesting investment opportunity. With a price increase of approx. 21%, it is rapidly closing the gap with neighboring Vinohrady. Large-scale projects around the old railway station are expected to continue pushing prices up in the coming years.
Rental Market and Yields – The Institutional Revolution (PRS)
One of the key trends in 2025 is the shift from a private landlord market to one increasingly influenced by institutional players (Institutional Rental Market). Data shows that a significant portion of housing demand has shifted to rentals, as many locals have been “priced out” of the buying market.
Rental Prices: Upward Pressure
Rental prices in Prague continued to climb in 2025, albeit at a more moderate pace than purchase prices.
- Annual Increase: Rents rose by an average of 5-7%.
- Price per SQM: The average rental price in Prague stands at approx. 440 to 460 CZK per sqm per month. In central locations (Prague 1 and 2), prices reach 490 CZK per sqm and above.
- Rent Burden: Households in Prague currently spend between 30% (for a studio) to 50% (for a 3-room apartment) of their income on rent, indicating a very tight market.
Yields
Gross residential yields in Prague range between 3% and 4.5%, depending on location and property size:
| Property Type / Location | Gross Annual Yield (Est.) | Notes |
|---|---|---|
| Small Apartments (Studio/1-Bedroom) | 4.0% – 4.3% | High liquidity, rigid demand from students and young professionals. |
| Large Apartments (3 Rooms +) | 3.4% | Lower current yield, but high appreciation potential and tenant stability. |
| City Center (Districts 1+2) | 3.0% – 3.5% | Low risk premium, high capital appreciation over time. |
| Periphery (Districts 9+10) | 4.2% – 4.5% | Higher current yield compensating for less prestigious location. |
Investor Insight: Although the current yield seems low compared to other markets, the combination of property value appreciation (over 10% in 2025) with rising rents creates a very attractive total return, significantly outperforming other solid investment alternatives.
The Dominance of PRS and AFI Europe
The year 2025 marked the consolidation of the Build-to-Rent model. Companies like AFI Europe are leading the trend:
- AFI Europe’s rental portfolio (the AFI Home brand) reached full occupancy of nearly 900 apartments in 2025.
- The company acquired the Nová Elektra project (approx. 290 apartments) and the Port7 office portfolio in a deal valued at approx. 130 million Euros.
- The entry of institutional players creates a new standard of management and service, pushing real estate investors to improve the quality of their assets to compete with the managed institutional product.
Supply Crisis and Developers
The paradox of the Czech real estate market in 2025 is the existence of peak demand alongside frozen and stagnant supply. Understanding this dynamic is critical to understanding future price appreciation potential.
Developer Protest and Project Freezes
A prominent example of the crisis is the dramatic decision by Central Group, the largest residential developer in the Czech Republic. In December 2025, owner Dušan Kunovský announced the freezing of new project launches totaling about a thousand apartments for one year. The stated reasons are soaring construction costs and an acute shortage of skilled labor. However, analysts also view this as a strategic move designed to maintain high price levels and pressure authorities to expedite procedures. The immediate implication is an exacerbation of the new apartment shortage in the coming two years.
Failure of the New Building Act
The New Building Act, intended to shorten the Czech Republic’s lengthy permitting procedures, is yet to deliver results. The positive impact on increasing supply is not yet felt on the ground. In fact, the number of building permits issued in 2025 stood at only about 61,613 nationwide – the lowest figure in 25 years. This figure ensures that the apartment shortage is structural and will not be solved in the short term, constituting a safety floor for prices.
Short-Term Regulation
Alongside economic data, 2025-2026 is marked by dramatic regulatory changes in the short-term rental market.
The New Law: End of the Party in the City Center?
The City of Prague and the Czech government are promoting the new Tourism Act (sometimes referred to as “Lex Voucher” or “Hospitality Act”), expected to come into full effect during 2026 (with a pilot in 2025). The law includes:
- e-Turista System: Mandatory digital registration for every property and obtaining a unique ID number, without which advertising on platforms is impossible.
- Local Authority Powers: Municipalities will be able to limit the number of rental days per year and the number of guests allowed per sqm.
- Enforcement: The system will enable data cross-referencing with tax authorities and real-time tax collection.
Implication for Investors: It is expected that thousands of apartments in the city center (mainly in Prague 1) will return to the long-term rental market or be sold, as the Airbnb business model becomes less profitable and riskier. For new investors, the “tourist apartment” model is becoming complex and regulated, with viability shifting back to stable traditional rentals.
Historical Comparison: Table vs. Previous Years
We compared 2025 data to significant milestones in the past, as documented and analyzed in our reports over the years.
Market Evolution – From 2021 to Today
| Index | 2021 Peak | 2022 Stagnation | 2024 Recovery | The New Peak 2025 |
|---|---|---|---|---|
| Avg. Price per SQM (New, Prague) | 106,750 CZK | ~120,000 CZK | 139,900 CZK | ~175,200 CZK |
| Mortgage Interest Rate | ~2-3% | 7-8% | ~5-6% | ~4.49% |
| Annual Sales (Units) | 7,450 (Prev. Peak) | Complete Stagnation | ~7,000 | ~7,800 (New Peak) |
| Market Dynamics | Sellers’ Market | Buyers’ Market | Stabilization | Strong Sellers’ Market |
Comparative Analysis: We see a full return and even surpassing of 2021 figures. The main difference is that current price levels are about 65% higher than in 2021, yet demand remains rigid. This indicates market depth and that the Czech public and investors have internalized and accepted the new price levels. While in 2022 investors could exploit stagnation for aggressive negotiations, in 2025 power has returned to developers and sellers.
The International Investor Perspective
Foreign investors continue to be a dominant factor in the Czech market, but their investment character is evolving.
- AFI Europe as a Benchmark: The company, under the leadership of Doron Klein (and local management by Karin Shalev-Shogol), is solidifying its position as one of the major market players. The completion of AFI Home projects and the strategic acquisition of Port7 indicate a shift from a development-and-sale approach to a hold-and-manage strategy.
- Opportunity for Private Investors: In light of peak prices in Prague, private international investors are beginning to seek value in developing districts (such as Prague 9 and 10).
Forecast for 2026 – Scenarios and Trends
- Housing Prices: We estimate a continued rise, but at a more moderate pace of 5-10%. The supply shortage (stemming from 2025 project freezes and permit scarcity) will meet falling interest rates, preventing price drops and continuing to support increases.
- Interest Rates: Expectation for a continued gradual decline towards 3.8%, which will further increase public purchasing power and bring more institutional investors back to the residential market.
- Rentals: Rental prices will continue to rise, supported by inflation and the shift towards managed apartments providing ancillary services.
- Regulation: 2026 will be the test year for Airbnb laws. We anticipate a “market cleanup” in Prague 1, which will raise the profile of hotels and long-term luxury living.
- Demand Zones: Prague 3 (Zizkov, for instance) will continue to lead in growth rates. Prague 9 and 10 will become the main attraction hubs for the middle class.
In conclusion, the verdict is clear: The Czech Republic of 2025-2026 is a mature, stable, and expensive market. The days of 2018 “bargains” are over. The game today is one of value preservation and solid growth in a stable currency and strong economy.
The big opportunities lie in gentrification zones (Districts 3, 7, 8) and segments enjoying structural supply shortages. The smart investor should view Prague today as “Little Germany” – a safe haven for capital, with yield potential exceeding Western Europe.
