Prague Apartment Prices Hit Record 180,000 CZK/m² Amid Supply Drop

The Prague real estate market is witnessing unprecedented changes as apartment prices have soared to a historic high of 180,000 CZK per square meter in 2025. This surge comes amidst a growing demand for new apartments, with sales reaching 7,800 units, marking an 8% increase from the previous year. However, supply challenges persist, with a 10% year-on-year decline, exacerbated by sluggish planning approvals and rising construction costs. This imbalance sets the stage for continued market pressures into 2026.

Prague's Housing Demand Surges as Supply Dwindles

In the first quarter of 2025, Prague saw a remarkable 60% increase in apartment sales compared to the same period last year, as reported by Prague Daily News. Despite this, the supply of available flats fell by over 6%, leaving only 5,350 units on the market. Such dynamics have made this the most successful first quarter in 15 years, driven in part by declining mortgage rates, which dipped below 4.7%, further fuelling demand.

Record-Breaking Prices and the Influence of Mortgage Rates

The average price for new apartments in Prague has reached a new record of 180,000 CZK/m². A key driver behind this price escalation is the decrease in mortgage rates, which now stand at 4.5%. Lower interest rates have made home financing more accessible, enticing more buyers into the market. Vanek Real Estate highlights that property prices increased by nearly 11% compared to 2024, reflecting the high demand and limited supply.

Slow Planning Approvals Hamper Supply Growth

One of the significant factors contributing to the supply constraints in Prague is the sluggish pace of planning approvals. Only 5,280 new apartments were approved between January and November 2025, representing a 17% decrease from the previous year. This bottleneck in the approval process is a major hurdle for developers looking to bring new projects to market. As reported by Reallocate.cz, rising construction costs further aggravate the situation, making it more challenging to increase housing supply.

Impact on Investment and Rental Markets

According to Expats.cz, property prices across Czechia are projected to rise significantly in 2025, with an anticipated increase of 5-10% for owner-occupied housing. The rental market is similarly affected, with rents expected to grow by 17%, mirroring trends from the previous year. Investment opportunities in Prague remain attractive, particularly in the commercial real estate sector, as investors seek to capitalize on the city’s robust housing demand.

Investor Strategies Amidst Market Pressures

Given the current market conditions, investors are advised to adopt strategic approaches to maximize returns. Recommendations include targeting freehold zones, underestimating potential rental yields by testing for a 10-15% downside, and carefully evaluating fee structures to optimize net yields. These strategies can help investors navigate the tight market conditions while positioning for future gains as the housing supply potentially stabilizes post-2026.

Future Implications for Prague's Real Estate Market

Looking ahead, the Prague real estate market is poised for continued pressure due to the existing supply-demand imbalance. However, legislative changes, such as the updates to the Building Act and Metropolitan Plan set to take effect in 2027, offer a glimmer of hope for easing constraints. These changes could streamline approval processes and encourage construction activity, thereby increasing the housing supply. Until then, prices are likely to remain elevated, driven by persistent demand and limited availability.