The Czech Statistical Office (CZSO) released May inflation data. Annual inflation slowed from 2.5% in April to 2.1% in May, while core inflation remained unchanged at 2.9%. Month-on-month inflation stood at 0.1%. Inflation has therefore moved significantly closer to the Czech National Bank’s (CNB) 2% target. Measured by the harmonised HICP methodology, inflation was even lower at 1.8% year-on-year. For comparison, Eurostat’s flash estimate showed inflation at 3.2% in the euro area, 2.7% in Germany, and 4.0% in Slovakia.
Although headline inflation has slowed considerably, indicators that are particularly important for the real estate market remain above average. Services prices increased by 4.7% year-on-year, while rents rose by 5.3%. At the same time, it is worth noting that the CNB’s Bank Board left the policy rate unchanged at 3.50% at its latest meeting. The next policy meeting will take place on 18 June, and interest rates are expected to remain unchanged.
Petr Sklenář, Executive Director of the Monetary Department, explicitly stated:
“Due partly to the impacts of the Middle East conflict, we expect headline inflation to fluctuate between 2% and 3% in the rest of this year. The elevated core inflation and the increase in the inflation outlook driven by global cost pressures are reasons for increased caution. Importantly, domestic monetary policy continues to have a restrictive effect despite the previous rise in inflation.”
In an environment where inflation is stabilising, the real value of assets and their ability to generate sustainable long-term returns become increasingly important. Residential properties in regional locations continue to maintain their attractiveness thanks to the combination of stable demand for rental housing and a limited supply of quality refurbished apartments.
Individual investors should also recognise that an investment case that only works if interest rates decline is a weak investment case. With financing costs still around 5%, success depends less on expectations of cheaper credit and more on the quality of the underlying property. Entry price, contractually secured yield, control of operating costs, and sufficient financing reserves all play a crucial role. For individual investors, achieving all of these conditions simultaneously is not always straightforward.
This is precisely the foundation of the Salutem Group model. Investors acquire a residential property with a pre-arranged tenancy and income stream without having to deal with tenant acquisition or day-to-day property management. In an environment of higher interest rates and rising housing costs, many investors place greater value on predictable income than on speculation about the future direction of mortgage rates.