Prague's New Apartment Prices Soar to Historic Highs Amid Supply Shortage

Prague's 2025 New Apartment Sales Hit Record Despite Supply Issues

Prague's housing market experienced a noteworthy year in 2025, with new apartment sales reaching a record-breaking 7,800 units. This represents an 8% increase from the previous year, highlighting the robust demand in the city. However, this surge in sales has coincided with a notable supply shortage, leading to significant price hikes. Prices for new apartments have approached 180,000 CZK per square meter, marking an 11% increase in actual selling prices. The imbalance between supply and demand is a growing concern, with only 5,280 apartments approved in the first 11 months of 2025, reflecting a 17% decline. This trend has fueled discussions among real estate analysts about the sustainability of such a trajectory in the coming years.

Prague Property Prices Climb as Supply Tightens

The factors driving the price surge in Prague's real estate market are multi-faceted. According to Prague Daily News, the supply of new apartments fell by 10% year-on-year, significantly constraining the market. At the same time, the average asking price for new apartments increased to 177,631 CZK per square meter, up 9% year-over-year. With demand continuing to outstrip supply, actual selling prices rose to 174,375 CZK per square meter, an 11% increase from the previous year. The shortage in supply has been exacerbated by falling mortgage rates, around 4.5%, which have spurred a high volume of mortgage approvals, amounting to 321 billion CZK. This dynamic is putting additional upward pressure on prices.

Impact of Mortgage Rates and Economic Factors on Prague's Housing Market

Mortgage rates and broader economic factors are playing a pivotal role in the current dynamics of Prague’s housing market. Falling mortgage rates, currently around 4.5%, have made borrowing more attractive, fueling a surge in demand for property. This is supported by Investropa's forecasts, which predict a 5% to 10% increase in residential prices in 2026, assuming inflation remains stable and mortgage rates only slightly ease. Moreover, the Czech National Bank's expectations of continued economic growth are likely to support ongoing demand, despite the existing supply constraints. The combination of these factors is anticipated to maintain upward pressure on prices, presenting both challenges and opportunities for investors.

Regional Comparisons: Prague Leads as Eastern Europe's Priciest City

Prague's status as Eastern Europe's priciest city is underscored by its recent performance in property markets. According to Expats.cz, the city has surpassed others in the region due to high inflation and persistent housing shortages. This places Prague ahead of regional competitors and emphasizes the unique challenges faced by the local market. In comparison, cities like Brno are experiencing similar trends but on a smaller scale, where supply constraints are not as severe. The emphasis on Prague as a central hub for business and tourism further amplifies demand, maintaining its position at the forefront of Eastern European property markets.

Investor Perspectives: Opportunities and Risks in a Volatile Market

For investors, Prague’s current market conditions present both opportunities and risks. While the record-high prices and constrained supply could deter some, others may see this as a chance to capitalize on the high demand. As Maya Tarek, a Senior Analyst at RealEstateAbroad.com, notes, "Investors need to be strategic about timing their entry and exit points in such a volatile market." The local government's constraints on new construction permits, which remain 20 to 25% below demand, are a significant factor for investors to consider. This limits the availability of new stock, potentially leading to further price increases. RealEstateAbroad.com analysis suggests focusing on areas with potential for regulatory changes that could increase supply as a viable strategy.

"Investors need to be strategic about timing their entry and exit points in such a volatile market."

Future Implications: Sustained Demand and Price Pressures Expected

Looking ahead, the Prague property market is expected to face continued challenges with balancing demand and supply. The Investropa report forecasts a continued price growth of 5% to 10% in 2026, provided economic conditions remain stable. This sustained demand, coupled with limited new developments, suggests that prices will remain elevated. Investors should closely monitor regulatory changes and economic indicators that could impact market dynamics. The ongoing housing shortage will likely maintain Prague's position as an attractive yet challenging market for international investors.