Buy vs. rent — when does each make sense?
"Rent is throwing money away." That's the line everyone considering home ownership hears. The truth is more complex than it looks — and in major Czech cities, in some years, renting actually beats a mortgage.
The basic math: when does rent throw money away?
Compare these two scenarios for the same flat (Prague, 5 million CZK):
Scenario A — buy with mortgage: 1M down payment + 4M mortgage at 4.5 % for 25 years = payment 22,253 CZK/month + 1,500 CZK service charges = 23,753 CZK/month total.
Scenario B — rent: the same flat rents for 24,000 CZK/month + 500 CZK overhead.
Almost identical monthly outlay. So which is better?
The hidden factor: property appreciation
Buyer is building equity — each month a bigger share of payment goes to principal, and the property itself appreciates. Over 10 years at 3 % annual property growth, your 5M flat becomes worth 6.7M CZK.
Renter pays the same total but ends up with 0 in property value. Even if they invested the difference (in this case there's no difference), they need market returns of 5 %+ to match real estate.
When renting wins
- Short horizon (under 5 years): transaction costs of buying (~5 % of price) eat the appreciation gain
- Falling property prices: renting protects you from negative equity
- Career mobility: renting is flexible, mortgages are sticky
- Major repairs ahead: roof, heating system replacement = renter's problem, not yours
When buying wins
- Long horizon (10+ years): appreciation + paid-off principal = real wealth
- Stable life situation: family, settled job, no plans to move
- Above-market rent: if rent is more than 5 % of property value annually, buying almost always wins
- Tax considerations: mortgage interest used to be deductible (less so since 2021)
FAQ
What's the rent-to-price ratio that signals it's better to buy?
Annual rent / property price. Above 5 %: buying wins. 4–5 %: roughly equal. Below 4 %: renting wins. Prague hovers around 3.5–4 % in 2026.
What if property prices fall?
If you've owned for less than 5 years and prices fall 10 %+, you're potentially in negative equity (more debt than property value). For long-term holders, short-term price drops don't matter — by year 25 the mortgage is paid off and prices have usually recovered.
I move every 2 years for work — should I still buy?
No. Transaction costs (real estate agent, taxes, time) eat ~5 % of property value per buy/sell. Buying every 2 years is a quick way to lose money. Rent until you're settled.