The disadvantage of investing in residential real estate has further deepened

Prague - The disadvantages of investing in residential properties deepened at the end of 2025. This follows from data provided to ČTK by UniCredit Bank today. Its indicator, representing the net annual yield of rent, from which the average interest rates on mortgages and government bonds are deducted, fell by 16 points to minus 3.07 percent since October. This brought the relative disadvantage of investing in apartments to its lowest value since September 2023.

"The indicator was pulled down by both the ten-point increase in government bond yields to 4.50 percent and the decrease in rental yields. The rental yield decreased by nine points to 3.65 percent due to faster growth in apartment prices compared to the increase in rents," said UniCredit Bank analyst Jiří Pour.

Older apartments in the Czech Republic saw a year-on-year price increase of 17 percent to an average of 82,091 crowns per square meter, as previously shown by an analysis from the real estate portal Sreality, based on data from January to November of last year. Rents for apartments increased by eight percent, and subleases of individual rooms rose by ten percent. The average rent in the Czech Republic was 272 crowns per square meter, while in Prague, the average rate was 400 crowns.

Among individual regional cities, the highest gross annual yield of rent in January continued to be offered by properties in Ústí nad Labem with 5.7 percent. The lowest yield was in Prague at 3.3 percent and in Brno at 3.4 percent. From November to January, rental yields decreased in seven regional cities, with the most significant drop in Pardubice.

The difference between the most and least profitable regional cities reached its highest value in 11 months, at 2.40 points, which is still a low value compared to the past. It is about half of the average since 2013. The differences in rental yields reflect various risks of apartment vacancy or non-payment of rent in individual areas, among other factors.

"The latest developments have not brought any fundamental signals indicating the anticipated cooling of the apartment market," Pour noted. Demand continues to be fueled by interest in homeownership and speculation about ongoing price increases for apartments. According to the analyst, these factors currently outweigh rational considerations about the relative disadvantage of these investments.

For an investor thinking long-term, in order for the purchase of an apartment to be worthwhile at present, they would need to believe in sustainable price growth of around seven percent, which neither UniCredit Bank nor, for example, the Czech National Bank, considers realistic, according to Pour's estimates. "We continue to believe that a cooling of the market and a gradual deflation of the price bubble will happen sooner or later, but the timing is a matter of question," he concluded.