Housing Affordability in the Czech Republic

Worsening housing affordability in the Czech Republic reflects a structural imbalance between supply and demand, where income-driven demand has persistently outpaced construction capacity constrained by slow permitting processes and municipal fragmentation. Using a structural vector autoregression (SVAR) framework, this paper quantifies the contributions of demand, supply, and monetary shocks to movements in Czech house prices. The findings show that while monetary policy can moderate cyclical pressures, achieving sustainable affordability requires structural reforms that address rigidities in the construction sector, scale affordable housing development, and modernize property taxation.