Real estate prices – both for rental apartments and apartments for sale – are constantly rising in the Czech Republic. Other countries are no exception, but how does Czechia compare to other countries?

Bloomberg focused on this question and monitored the real estate market in 30 member and candidate countries of the OECD (Organization for Economic Cooperation and Development) in its analysis. It ranked countries according to how overvalued real estate is there.

Five main indicators were monitored: the ratio of property prices to monthly rents, the ratio of prices to incomes, real and nominal year-on-year price growth, and year-on-year credit growth.

Czechia ranked high in this analysis. It finished second in the overall comparison, with New Zealand in first place. Hungary finished third.

According to the text, real estate prices increased by 26% compared to last year. The data is based on information from CEIC Data. The difference between the income of the average citizen and real estate prices is now one of the largest in the European Union, raising concerns about a real estate bubble.

In countries with overpriced real estate, there is a risk that rising interest rates will burden households with mortgages and worsen the prospects for economic growth. The analysis shows that Czechia has the second-highest increase in interest rates among the countries surveyed. The Czech National Bank is trying to curb inflation with high rates. In May (as stated in the text), inflation reached 16% year-on-year. Last year was also a record year in terms of lending: Czechs borrowed CZK 540 billion for housing, representing a year-on-year increase of 69%.

New Zealand, which ranked first, saw real estate prices rise by 30% last year. Analysts expected the local real estate bubble to burst this year and prices to fall by about 10%.

In nineteen OECD member countries, including the Czech Republic, the ratio of rental housing prices to income is currently higher than before the 2008 financial crisis. This may indicate an overvaluation of prices that does not correspond to the economic situation. At the same time, however, the scenario from the last crisis, when the bursting of the real estate bubble in the US was followed by a rapid fall in prices and stagnation, may not necessarily occur. Banks have tightened mortgage conditions and household savings are still relatively strong, so the situation may not be immediately dire.