Meera Sankar knew it was time to give up her dream of buying a home in Prague when she looked at a flat barely big enough for one person but carrying a budget-busting price tag.
The 31-year-old's experience is a common one in Prague and other cities in central Europe where high prices, squeezed by acute supply shortages, have pushed home ownership out of reach for many potential first-time buyers. As the region's central banks now hike borrowing rates, the problem is getting worse.
This compares to six average salaries to purchase a property in Germany and 5.1 in Norway. Czech housing prices also rose 22% year-on-year in the third quarter of 2021, the fastest rise in the European Union for a second quarter in a row, according to Eurostat data. An added problem in Prague is the long wait for developers to get construction permits, which has limited supply. In 2021 supply in the Czech capital hit a 10-year low, according to an analysis by developers Trigema, Central Group and Skanska Reality, with 3,300 new flats available on average in the year, 1,980 less than in 2020.
Hungary's central bank said in January it would continue rate hikes to curb inflation. Poland - emerging Europe's biggest economy - raised rates again on Tuesday, by 50 basis points to 2.75%, and hinted at more tightening to come. Hungary froze retail mortgage interest rates for a six-month period from January to shield borrowers with floating mortgages and has targeted grants and subsidized bank loans worth up to a combined 25 million forints available to families.
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