Apartment rental yield in the Czech Republic ranges in the favourable area between 4% and 6%. At the same time, Czechs theoretically have to save money for a new apartment for the longest time, almost eleven years. These are the results of the most recent Deloitte Property Index, which compares the market with residential properties in selected European countries and cities and in Israel. While the prices of new residential properties in the Czech Republic are the highest in Central Europe, their year-on-year growth was not as dynamic.
The sixth Deloitte Property Index study focused also on rental for the first time this year. 23.4% of households in the Czech Republic live in a rented house or apartment. Rental housing is the most popular among Germans (54.3%) and the least among Slovenians (2.4%). The yield from rent is between 4% and 6% in the three Czech cities compared. Ostrava fares the best, with annual yield of 6.1% of the invested amount (with the average rent cost of EUR 5.8 per m2), Prague ranks second with 5.5% (rent of EUR 10.9 per m2) and Brno third with 4.7% (EUR 7.6 per m2). The lowest yield from rent in all of the compared cities was recorded in central London (2.0%) and the highest in Odense, Denmark (8.9%).
“Just like for commercial real estate, the profitability of rental housing depends on a location. In general, the lower the yield, the more attractive the location is for living”, says Petr Hána, Manager of Deloitte’s Real Estate department.
The latest Deloitte Property Index also compared the average housing prices per square meter in selected European countries. In a year-on-year comparison, the development of prices in those countries differed as usual. The highest year-on-year growth was recorded in Slovenia (+26.5%), Spain (+15.2%) and Denmark (+10.8%). In contrast, the prices of real estate in the United Kingdom dropped by 9% due to the devaluation of the British pound in relation to the euro.
The average transaction price of new real estate in Prague in 2016 was approximately EUR 2,368 per m2 (a year-on-year growth of 10.5%). The cheapest city in this comparison has repeatedly been Debrecen, Hungary, where a square meter cost on average EUR 883. In contrast, inner London (EUR 16,538 per m2) and Paris (EUR 12,374 per m2) have traditionally been the most expensive areas.
“The prices of new apartments in certain European cities grew at a double-digit rate. The prices in inner Paris grew by as much as 16% and the prices in Budapest or Brno by 15%. However, the most marked change was recorded by Israeli cities. The prices of residential properties in Tel Aviv grew by 17% and in Haifa even by 21%”, specifies Vojtěch Petrík, Consultant in Deloitte’s Real Estate department.
The mortgage interest rate in the Czech Republic was the lowest in comparison with other European countries – on average around 1.77%. And Czechs have claimed another first place in the Index. For the first time in the history of the Index, affording new housing is the most difficult for them, as the cost of an average apartment of 70 m2 is equal to 10.9 average gross annual salaries, almost one whole annual salary more than the British, who ranked second.
“The prices of new real estate in the Czech Republic are now significantly higher than in the neighbouring Poland or in Hungary, especially due to the decreasing stock of development projects and apartments available for sale. At the same time, our salaries are relatively low in European comparison,” adds Petr Hána.
You can download this year’s Deloitte Property Index here.