Rents in Prague are rising fastest in housing projects, according to an analysis by Deloitte covering the past five years.
In the period under review, rental prices responded with a slight delay to the rise in selling prices of owner-occupied dwellings, both in the segment of new buildings and the resale of older apartments.
Overall, the average rent per square meter between 2014 and 2018 increased by 94 CZK from 213 CZK in the first half of 2014 to 307 CZK in the first half of 2019. The average rents in Prague grew at an annual rate of 7.3%. The largest increase in rental prices was recorded in 2017, when the price level in Prague increased by 12.5%.
“This data shows how all processes in the city are intertwined. Low supply and regulation on the banking market generates increased demand for rental housing, and this situation affects the whole city. It is necessary to work intensively on adding the necessary number of flats by both private investors and the city in order to expand the offer of rental housing,” Deputy Mayor Petr Hlaváček (United Force for Prague), responsible for territorial development, said on the City Hall website.
The analysis shows that the absolute level of rents, which was in 2014 only in the very center of the city, has spread over the whole Prague over five years, meaning the inhabitants of Háj or Kamýk now pay the same rent as the residents of Prague’s New Town district at the end of 2014
The four cadastral districts with the highest average rent per square meter are Josefov, Malá Strana, Old Town, and New Town. In the first half of 2019, average rents here amounted to 424 CZK, 418 CZK, 386 CZK, and 372 CZK per square meter, respectively.
On the other hand, the marginal districts of Prague, such as Šeberov, Benice, and Kolovraty are the cheapest, where the average rent in the first half of 2019 was around 200 CZK per square meter, City Hall stated in a press release.
A comparison of the growth of rental prices of modern housing projects and apartment buildings, and heterogeneous developments showed a similar growth trend in rent development, despite the differences in price levels of individual locations.
However, a more detailed survey shows that the level of rental prices in housing projects grew faster in 2017 and 2018, while in apartment buildings and heterogeneous locations it was earlier. “It is therefore clear that the rise in the selling prices of flats has, with some delay, an obvious impact on the growth of rents across Prague. The increase in rent levels has a significant impact on all modern housing projects, including those where new construction is almost non-existent,” City Hall stated.
An analysis of factors affecting the amount of rent and the rate of its growth showed that the number and share of new dwellings is associated with a higher pulse of rent growth and its higher level. The proximity of parks and undeveloped farmland affects only the total rent, and ultimately the growing localities have a positive effect on the total rent, but the rent growth was lower. The proximity of metro stations is an important factor affecting the rent.
Another resent reports showed that housing prices in Prague were rising faster than rents, making it difficult for some landlords to make a profit.
Several large developments in Prague are taking place in Karlín, Smíchov, Nové Butovice, and Bubny-Zátory, but will not be on the market for some time. Developers have long criticized the amount of red tape required to start a new development.
At the same time, the amount of high-rise development has raised questions over Prague’s status as a UNESCO World Heritage Site.