Renting in Prague

Rent

Rents in Prague can be comparable to those in similar cosmopolitan cities around the world. However, there are currently two separate and distinct residential markets in Prague. First is the Czech market which is predominated by low priced, non-western style apartments. The other market is the expatriate community living in high priced, western finished apartments and homes.

As these two markets see prices continue to change, the Czech market is experiencing a slow but steady increase in rental prices while the expatriate market sees a decrease in pricing, there will be an eventual convergence. This is expected sometime over the next three to five years. Once this occurs the marketplace will become similar to any other western market where locals and foreigners alike will be able to find housing at the same pricing levels without regard for nationality, etc. The implication is that demand for low-to-mid priced housing will be increasing.

Furnishings

A furnished rental property tends to cost somewhat more than those that are not. Though there are many furnished apartments, it can be quite difficult to find good furnished home. Much of the furnishings are remnants from a previous era.

Short term leases

Short term rents in Prague for apartments or flats and houses are significantly higher than long term. 'Long Term' is considered to be 1 year or more. When renting a property for shorter term, landlords have much higher management and vacancy costs. As a result, a short term rent may be 30 - 50% higher than the long term rent for the same flat. Short term flats are found almost exclusively in the center.

Regulated Rent

It should be noted that 90% of housing in the Czech Republic is subject to some form of rent control. At the time of the revolution, limits were placed on the rents of all properties. When the original occupant leaves a property, however, the limits no longer apply and subsequent occupants pay significantly higher market rents.

At present, rent in the housing sector is regulated in respect of unlimited leases for Czech citizens. The net rent is being deregulated step-by-step for both municipal and privately owned apartment houses, but is the subject of hot controversy. The price paid for amenities such as water, gas and electricity supply, or services such as waste collection has been fully liberalized or deregulated at faster rate than the net rent. This part of housing costs has increased by more than 400 per cent between 1990 and 1995. The net rent was first increased in June 1992 by 100 per cent. The second increase of rent followed in January 1994. At that stage, the ceiling for rent increase was lifted by an average of 40%. However, while the increase has been lower than 30% in some areas, it has reached levels over 100% in others, such as Prague.

The rent in apartment houses completed after June 1993 and not supported by any State subsidy is fully deregulated and can be determined freely by a mutual agreement of tenant and landlord. The same applies to rent paid by foreigners, which is also not limited by any regulation. Consequently, there are two housing markets in Prague: first, the domestic and regulated one, and second, the deregulated housing market used by foreigners and wealthy Czechs. This split stimulates a transfer of housing units from the former to the latter segment of the market. Furthermore, the number of transfers of apartments out of the regulated segment of the housing market is even higher because of changes from residential to office use. From July 1995, market rent can be charged for newly signed leases; however, it is difficult to estimate the consequences of this measure. Consequently, the rent in Prague increased by 35%. In 1998, the rent deregulation reached 26 per cent on average in the Czech Republic. In Prague, the rent ceiling was increased by 41 percent.

The rapid rent deregulation was accompanied by an introduction of a special housing allowance to partially compensate for the sharp rental increases. Furthermore, the prices for heating have also been lifted by a high rate and, consequently, another special allowance was applied to compensate increase in heating costs.

By 1997, the average expenses for a three room flat in public and private sector apartment houses with regulated rent were nearly 20 per cent of the net income of a typical Czech family with two employed adults and over 25 per cent in the case of a pensioner household. Despite a lower share of household expenditure for housing in comparison with west European countries, the increase in housing costs can mean quite a heavy burden for lower-income families.

Service and Utility Charges

Tenants in Prague apartments and houses pay charges for their own gas, electric, telephone and other utilities. Almost all rents are expressed exclusive of utility charges. Except for telephones, most utilities are billed only once per year. Tenants pay regular utility deposits which are reconciled when the yearly usage bills are received. Utility bills typically remain in the name of the landlord. Tenants either reimburse their landlords or pay the suppliers directly.

Service charges or Common charges cover the cost of maintaining the shared parts of a building (electricity and cleaning in the public halls, elevator maintenance, management, etc.) in the case of a multi-family apartment building. Services/common charges are pass through charges which building managers pay directly to the suppliers. In most leases for residential rentals, the part of the rent that covers services is not specified, however, some leases list 'Rent' and 'Services' as two separate charges.

Security Deposits

In the Prague real estate market, at the beginning of a lease for an apartment or a house, a tenant pays their landlord a security deposit. The landlord holds this money for the duration of the lease term and is allowed to use it only if the tenant damages the property or fails to make the agreed payments. The landlord returns the security deposit at the end of the lease as soon as the property is vacated and all of the tenant's bills are paid. The security deposit is often equal to 1 month's rent, but 2 or 3 months is common in more exclusive or furnished properties.