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Rental prices are quite stable compared to buying a new apartment

The popularity of rental flats is growing, but we're still lagging behind Western Europe

Radek Polák
23.Jun 2021
+ Add on Seznam.cz
4 minutes to read
Mladý pár se právě nastěhoval do nového nájemního bytu

More and more people are moving to cities, but housing options aren’t ideal. There is a shortage of available flats and their prices are rising steeply. Many people looking for an apartment, therefore, opt for rental housing. Although their numbers are growing, west of our borders, this segment is even more prominent.

Comparison with other countries

Within the European Union, we belong to the countries with the lowest share of rental housing. According to Eurostat data, about 22 percent of people in the Czech Republic live in rental housing, while it’s twice as many over in Germany or Austria. And in Switzerland, more than half of the inhabitants choose this option.

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But let's look at the situation in Poland or Hungary, too. According to Eurostat, the share of privately owned housing over at our northern neighbours has increased by a fifth in the last ten years. That means over 83 percent of Poles live in their own house or apartment. In addition to the historical experience with the expropriation of property during the communist period, this trend is currently influenced by high rental prices in Poland, which are comparable to Germany. Compared with the Czech Republic, Poland and Germany, Hungary has the highest share of people living in their own flats - over 85 percent. However, it has been steadily declining since 2012.

Luxusní byt na prodej Smíchov - Praha 5 - 147m
Luxusní byt na prodej Smíchov - Praha 5 - 147m, Praha 5

The comparison of individual cities has an even higher informative value. While in Prague, this share is less than 30 percent, in Zurich, Switzerland it exceeds 90 percent. It is more than 80 percent in Berlin and over 75 percent in Vienna (Source: ec.europa.eu/eurostat).

Traditions and trends

Why is it that we belong to those countries where people aren’t so excited about rental housing? The main reason is tradition. Czechs prefer to live in their own place - similar to people from other countries in Central and Eastern Europe. Moreover, with the boom of privately-owned housing, rental housing started to be psychologically perceived as typical of and suitable for low-income citizens or for students, but not for the middle and upper classes. Despite the fact that these people could currently move into luxury apartments right in the centre of historic Prague!

"Rental housing is becoming more and more popular in our country - people opt for it mainly because not everyone can afford to own an apartment. Unfortunately, it’s not without risks for both landlords and tenants. For landlords, it’s usually better to make a few compromises, ensuring that the tenant is content in the apartment and won’t feel the need to move out any time soon. On top of that, as a tenant, you have the opportunity to visit your apartment or any other kind of property even while renting it out,"

says Elena Jakubovič, founder of the real estate agency Y&T Luxury Property.

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In spite of that, there has been a growing interest in investment apartments in the last few years, especially in new buildings, which are then used as rentals. There are several reasons for this trend. Investing in residential real estate is currently one of the most advantageous ways of saving and preserving one’s financial resources or increasing their value. 1-bedroom apartments are most popular, as they’re easy to rent, and at the same time the income from their rental still pays off in comparison with the acquisition costs. In Prague, for example, the return on such an investment is much higher than in western metropolises, by 0.5 to 1 percent. This is one of the reasons why the share of investment apartments in a new development project is around 30 to 40 percent.

Of the roughly 600,000 households in Prague, more than 150,000 are apartments for rent. However, more and more people are moving into rental flats. The reason? Money. Rental prices haven’t changed much, over the last 5 years they have seen an average increase of no more than 10%. Due to the fact that the number of flats for short-term rent has been gradually decreasing since last year because of the coronavirus pandemic, it is currently possible to choose from more than 15,000 units intended for long-term rent in the capital. The relatively rich selection of rental apartments can thus stimulate further interest.

"Thanks to lower rental prices, many of us have been able to return to the historic centre of Prague since 2020. It's a great opportunity to live in the centre, be closer to history and enjoy the leisure and entertainment that Prague 1 offers. This type of housing isn’t for everyone, but it's a great experience that we shouldn't miss, now that we have a chance to try it out,"

adds Elena Jakubovič.

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Rodiny s dětmi jsou v nájemních bytech do doby, než si našetří na vlastní
Rodiny s dětmi jsou v nájemních bytech do doby, než si našetří na vlastníSource: Freepik

Large players in the development field have been gradually taking their business to the area of rental housing. Their rental apartments are tailor-made especially for people who value independence. Such housing offers greater flexibility when moving. The tenant is not even forced to deal with common operational issues. At the same time, more and more people with higher incomes are coming to realize that this gives them more time for self-development or running their business.

Housing for both young and old

"In addition, research shows that so-called millennials, who should make up the bulk of the working-age population by 2025, invest money in experiences and their hobbies rather than bricks."

says Peter Noack from an investment company in one of the panels for realassetlive.com.

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On the other hand, it also means a certain risk for landlords. The situation is especially problematic when the tenant owes several rents at once and the landlord doesn’t have the opportunity to move him out of the apartment. Therefore, it still remains more advantageous for developers to sell the flats into personal ownership and dispose of the real estate once the apartment buildings are completely occupied.

Even so, it is assumed that in the future, even the senior generation could discover the advantages of rental housing. It is currently estimated that around 220,000 pensioners live in rental flats. The vast majority pay market rents, with only about 35,000 enjoying reduced prices (Source: ec.europa.eu/eurostat).

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Due to the fact that there are few apartments for sale on the market, rental prices are likely to keep rising. However, this is unlikely to have an impact on the growing interest in rental housing.

"We expect that demand for rental housing will keep increasing,"

adds Marcel Soural, chairman of the board of a development company.

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Vlastní bydlení vyjde dnes už i pro mladší páry dráž, než nájemní
Vlastní bydlení vyjde dnes už i pro mladší páry dráž, než nájemníSource: Freepik

The importance of rental housing can thus be further strengthened. Especially in larger cities, where prices for new homes are rising steeply. However, due to tradition, the share of rental housing is unlikely to be higher than that of owner-occupied housing in a few years. One thing is for sure, though: when choosing an apartment, we will definitely have more options.

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