Last year, the Czech Republic was second to last among all European countries in housing affordability, i.e. the ratio of wages to the price of new housing, and according to the latest data it is dead last this year. On average, it costs the equivalent of 13.3 gross annual wages to buy a new property in the Czech Republic. Moreover, Prague is the least affordable European capital after Amsterdam.

One of the most important indicators of the Property Index is the affordability of homeownership in individual European countries. It is calculated from the average annual gross wages needed to own a new standardised apartment of an average size of 70 square metres in each country.

To become a homeowner, Czechs need about 13.3 gross annual wages, the same as a year ago. Slovakia came in second place, having improved by 1.4 average gross salaries compared to last year, and now needs the equivalent of 12.7 gross salaries to buy a new home, which is an improvement in comparison to the Czech Republic.

"The Czech Republic ranked worst the year before last, last year we were overtaken by Slovakia and finished second to last, and now we are again the worst in the whole of Europe. The affordability of home ownership in the Czech Republic thus remains poor and so far it doesn't seem to be about to change. Among the most important factors that can improve the low affordability of housing are the construction of new houses and apartments, simplification of building regulations and permits, availability of mortgages, improvement of infrastructure, and support for development projects focused on affordable housing," says Miroslav Linhart, a senior partner in Deloitte's Financial Advisory Department.

The Czech Republic and Slovakia are followed by Israel, Ireland, Hungary, Serbia, France and Croatia. On the other hand, the most affordable home ownership among the 18 EU countries surveyed is currently in Denmark, Norway, Italy, Romania, Greece and Slovenia. The least affordable cities are Amsterdam and Prague.

A look at all European capitals shows that Amsterdam in the Netherlands, which has topped the list in previous years, continues to have the least affordable standardised housing. Buyers in Amsterdam have to save the equivalent of 15.1 average gross annual salaries to afford their own home. This is 0.7 less than last year, yet Amsterdam remains the least affordable city on a gross income to price per square metre basis.

"However, it is important to add that in the Netherlands, buyers can obtain a mortgage covering up to 100% of the property value and benefit from tax advantages such as the mortgage interest tax deduction, which reduces the cost of purchasing a home. This suggests that other factors also influence the real affordability of housing and comparisons based on gross income alone may not fully reflect the real affordability of housing in the Netherlands' most populous city," adds Miroslav Linhart of Deloitte.

After Amsterdam, Prague is now the second least accessible capital city in Europe. On average, Prague residents have to save the equivalent of 13.5 gross annual salaries to own their own home.

"Although last year Prague residents needed the equivalent of 14.3 gross annual salaries to own their own housing and this year it is 13.5 salaries, Prague has fallen in the availability of its own housing. After Amsterdam, it is now the second least affordable of the surveyed cities in Europe. Bratislava, which was second to last last year, has improved by two places and leapfrogged Prague," says Petr Hána, director of the real estate and construction department at consultancy Deloitte. He adds that the main reason why Prague was ranked at the bottom last year is a combination of low salaries, high prices and, in the context of last year, less affordable financing for own housing.

The most affordable cities in Europe are Rome and Oslo

After Amsterdam and Prague, Athens, Bratislava, Dublin and Belgrade took the next places. On the other hand, Rome and Oslo are again among the most affordable cities in Europe to own a home. The equivalent of less than eight times the average gross annual wage is enough for residents there, followed by Zagreb, Warsaw, Copenhagen and Ljubljana.

The Deloitte report also focused on rental housing prices. The most expensive European cities for renters are inner London (€33.8 per square metre per month), Dublin (€31.5 per metre), Paris (€31.3 per metre) and Barcelona (€30.6 per metre). At the other end of the ranking, cities in Greece, Bulgaria, Italy or Romania are the ones with the lowest rental prices for the past several years. Prague, where the average monthly rent has increased from 14.4 to 15.9 euros per square meter, ranks twenty-fourth out of nearly sixty cities analysed.

"Due to the decreasing availability of their own housing, many households are increasingly turning to rental housing. The rental market in the Czech Republic was tight during 2023 and prices were returning to pre-pandemic levels, in some places they have already surpassed them. Thus, rental housing is booming especially in all regional cities and, in parallel, more and more investors and developers are starting to focus on building rental projects," adds Deloitte real estate expert Petr Hána.

The most expensive new buildings are in Israel and Austria, the cheapest in Bosnia and Herzegovina or Greece

Israel, which returned to the Deloitte Property Index last year, once again topped the list of countries with the most expensive new properties. In 2022, Israelis spent an average of €5,439 per square metre on new buildings. Austria came in second place with transaction prices of €4,920 per square meter.

Germany is closely followed by Austria with transaction prices of EUR 4,700 per square metre. France and the Netherlands join the top five most expensive countries for 2023 with average prices of €4,538 and €4,266 per square metre respectively.

In the Czech Republic, as well as in 15 other countries out of 24, the average price of new flats rose. It has jumped by more than nine percent, specifically from €3,753 in 2022 to the current €4,112 per square metre.

At the other end of the price scale is Bosnia and Herzegovina, which recorded the lowest average price for new apartments at EUR 1,315 per meter. This was followed by Greece (€1,463 per metre) and Romania (€1,504 per metre). No European country had transaction prices below €1,000 per metre.

The building leaders are Ireland, Israel, Poland, Denmark and France

Part of the survey also focused on the intensity of new housing construction. This is calculated from the total volume of completed dwellings per 1 000 inhabitants in the countries concerned. The highest number of housing completions was recorded in Ireland, Israel, Poland, Denmark, France, Austria, Belgium and Norway. In contrast, the slowest growth, namely less than two completed dwellings per 1 000 inhabitants, was recorded in Bosnia and Herzegovina, Slovenia, Spain, Hungary, Portugal, the United Kingdom and Germany.

"In terms of the year-on-year percentage comparison of housing completions, the largest increases were in Belgium and Bulgaria, both by more than 14 per cent. Growth was also recorded in Israel, Ireland, Portugal and Slovakia. The Czech Republic ranked tenth out of twenty countries surveyed with 3.52 completed apartments per 1,000 inhabitants," says Jakub Leško, manager in Deloitte's real estate department.

Conversely, a decline in new building completions was recorded in several countries. The largest falls were recorded in France (-22.6%), Germany and Denmark (both -12.5%), the United Kingdom (-11.0%), Hungary (-10.1%), Slovenia (-9.7%) and Poland (-7.6%).

Interest rates in the Czech Republic were the fifth highest, same as a year ago

One of the most important indicators of the health of the mortgage market in a particular country is household debt. This represents the ratio of all outstanding mortgage loans of households to their total disposable income.

"The ability of households to take on new debt is an important factor affecting residential property prices. The available data show that household debt levels vary considerably across European countries. These differences can be attributed to several factors, including the proportion of mortgage holders in each country, the maturity of their mortgage markets and the historical development of their domestic residential markets," said Jakub Leško of Deloitte.

Average household debt is low in Hungary, Romania, Greece, Slovenia and Croatia, where the share of total outstanding mortgages in household disposable income is below 30%. Central European countries such as the Czech Republic, Austria and Slovakia manage to maintain debt levels between 40% and 60%. France and Germany - two of the largest residential property markets in Europe - remain above 70%. At the other end of the spectrum, Denmark, Norway and the Netherlands have the highest levels of household debt. While Denmark is below 170%, in Norway and the Netherlands debt has climbed to almost 180%.

The highest average mortgage interest rates last year were in Poland (8.1%), Romania (7.7%), Hungary (7.4%) and Serbia (6.8%). The fifth highest average mortgage interest rate was in the Czech Republic (5.9%), which also ranked fifth a year ago. This was followed by Denmark (5.2%), Bosnia and Herzegovina (4.9%), Norway (4.8%), Italy and the United Kingdom (both 4.7%). By contrast, the lowest average mortgage rates were recorded in Bulgaria (2.5%), Spain (3.1%), Belgium and Croatia (both 3.3%), France, Slovenia and Portugal (all 3.6%), Israel and Slovakia (both 3.8%) and Austria (3.9%).

Read the full report here: Deloitte Property Index 2024 | Deloitte Czech Republic