Rising construction costs in the Czech Republic are threatening new housing supply

In the Czech Republic, a new round of rising construction costs is increasing pressure on the housing market. Developers are increasingly postponing project launches due to expensive materials, energy, and financing. This threatens to further reduce housing supply and worsen affordability, especially in Prague.

Rising construction costs in the Czech Republic hit developers again

Discussion of a new wave of rising construction costs in the Czech Republic intensified in April 2026. There are concerns that the market could re-enter a slowdown phase similar to 2022–2023. Construction supply costs have increased by 27% over two years, making some new projects economically borderline or unprofitable. Construction prices rose by 2.7% year-on-year in March and by 0.7% month-on-month, confirming continued upward pressure on costs. Overall construction costs in the Czech Republic remain high after several years of accumulated growth.

A higher cost base has become entrenched. Participants increasingly speak about a structural loss of some new projects that no longer work economically without further price growth in sales.

Central Group has already delayed new projects in the Czech Republic

Signals from major players appeared at the end of 2025. Central Group, one of the country’s largest residential developers, announced it would not start any new construction, citing an overheated market and excessively high prices for labour and materials. The company stressed that ongoing projects continue, but new phases are being postponed due to rising costs. This is important for the market, as such decisions by major players are often an early indicator of broader supply cooling. The developer is waiting for prices to fall by around 10% before launching construction of about 2,000 new apartments.

Expensive credit is increasing pressure on the Czech housing market

Pressure on projects is also increasing due to the cost of money. In March 2026, the average interest rate stood at 4.43%. This remains high compared to the era of ultra-cheap money, continuing to strain both buyers and project financing.

The problem for developers is often broader than mortgage rates for households. The International Monetary Fund, in its Czech report in spring 2026, noted that housing affordability is worsening due to a combination of weak supply, long approval processes, and high sensitivity of the market to financial conditions. This means that even moderately expensive credit, combined with higher construction costs, can significantly weaken the economics of new projects.

Construction delays may accelerate apartment price growth in the Czech Republic

If some developers postpone new phases, this directly affects future supply. This is already especially visible in Prague: sales of new apartments remain high, while the average asking price in Q1 2026 reached 182,311 CZK per square metre. In a January overview by Central Group, Skanska Residential and Trigema, 2025 was already described as a record year for new apartment sales in Prague, while supply continued to shrink. In such a situation, any further increase in construction costs does not only raise expenses but also deepens the existing supply shortage.

For buyers, this creates a paradox: even if demand cools somewhat due to rates and higher costs, prices do not necessarily fall because the market does not receive enough new supply.

Reform of permits and planning

The market and experts increasingly agree that monetary stability alone is not enough. The key issue is how quickly projects can move into construction. The new building law and its amendments aim to speed up and simplify procedures, introduce a single permitting process, and shorten changes to zoning documentation. It is also emphasised that zoning changes should become faster and simpler, while timelines for simple projects are being tightened.

This issue is also linked to Prague’s long-term development horizon. In autumn 2025, city authorities and observers noted that the new metropolitan plan could eventually enable up to 350,000 apartments on former industrial sites. However, even supporters acknowledge that the effect will be spread over years, and without faster unlocking of current projects, the market will remain in a state of chronic shortage.

As experts from International Investment report, the risk for the Czech Republic is that the combination of high construction costs, expensive financing, and slow approval processes may freeze part of new development just when the market needs more supply. If approvals are not accelerated and administrative barriers are not reduced, the housing shortage in Prague and other major cities will continue to grow.

FAQ: rising construction costs and the Czech housing market

Have construction costs and supply prices in the Czech Republic really increased sharply?

Yes, there has been significant cumulative growth over the past two years, although recent official data shows more moderate annual increases.

Why are construction costs so important for the Czech housing market?

Because high costs and expensive financing make some new projects unviable, leading developers to postpone construction.

Has Central Group stopped new projects in the Czech Republic?

The company has publicly stated that it does not plan to start new construction in 2026 due to high costs for labour and materials and an overheated market.

Are mortgage rates in the Czech Republic above 5%?

According to Czech Banking Association data, the average new mortgage rate in March 2026 was 4.43%, below 5% but still relatively high.

What could improve the situation on the Czech housing market?

Faster approval processes, more flexible zoning regulations, and more predictable conditions for launching new projects.