Amidst the fluctuating housing market in the Czech Republic, potential buyers and renters are posed with a critical dilemma: Is it better to rent or buy a property in the current market conditions?
For those with substantial savings and higher income, a mortgage on a discounted flat may be more cost-effective than paying high rent. With the inflation of 6.9% in September surpassing the current mortgage rates, this could be a sound financial move, especially as rates are anticipated to drop within the next two years. However, renting seems to be the more affordable option in the immediate term.
The crux of the decision may lie in the ability to negotiate a discount on the purchase price of the flat, given the fact that many potential buyers may not qualify for a mortgage at current rates. This is particularly relevant for flats bought second-hand. Depending on the negotiation, savings could be more than ten percent off the listed price.
Over the long term, ownership is generally a better financial decision than renting. With the gradual repayment of the mortgage, interest rates decrease, whereas rent can significantly increase over time.
However, short-term considerations lean towards renting. This usually requires only three months’ rent upfront for a deposit and real estate agency fees. For example, the monthly rent and mortgage payments are similar in cities like Prague.
While rents are likely to increase, mortgages are expected to become cheaper. Therefore, deciding between buying or renting a property is not straightforward and depends on various factors, such as the prospective buyer’s financial situation, long-term plans, and market forecasts.