Young People and Homeownership: An Unattainable Dream or a Matter of Planning?

A first home does not have to mean a new-build apartment in the city centre, nor does it have to be the home you stay in for the rest of your life. What matters more is finding a solution that fits your current means and can serve as a sensible starting point.

In our previous article, we showed that buying an apartment today is more demanding relative to income than it was thirty years ago. But this often leads to the overly hasty conclusion that homeownership is simply out of reach for young people. For many of them, it can still be achievable if they start building up their own funds early, set realistic expectations and give themselves a few years to follow a concrete financial plan.

Headlines won’t calculate your mortgage

It is easy to get the impression from the media that homeownership has become virtually impossible for the younger generation. Yet headlines do not determine what an individual can afford. What matters most is their income, savings, the price and location of the property they choose, and how much time they have to prepare. Housing is undoubtedly expensive, but that does not automatically make it unaffordable.

This time, therefore, we will take a practical look at what a young person can do today to put themselves in a position to buy their own apartment in a few years’ time. Rather than asking, “Can I afford my dream apartment today?”, it is more useful to consider what kind of property is realistic given their current circumstances and what they need to do to make that purchase possible.

Your first apartment does not have to be your forever home

The idea of a spacious new-build apartment in the city centre, complete with a terrace and parking, is perfectly understandable. But just a few years after graduation, it may not reflect financial reality. That does not mean homeownership is out of reach; it simply means that the first purchase needs to match what someone can safely afford at that stage of life.

For some, a realistic option might therefore be a studio, a one-bedroom apartment or a smaller two-bedroom apartment in an older building, on the outskirts of the city or in a well-connected nearby town. Less space, a longer commute or an older building are genuine compromises, but they can provide a way into homeownership without burdening the household budget with an excessively high mortgage payment.

Two practical paths to a first home

Let’s look at two illustrative scenarios for a buyer under the age of 36: a 90% mortgage, a 30-year repayment term and an annual interest rate of 4.69%.

The calculation is illustrative and does not include an emergency reserve, insurance, any difference between the purchase price and the bank’s valuation, or other costs of ownership. Even so, it clearly shows how significantly the price of the property affects affordability: a difference of CZK 1 million means an additional CZK 100,000 in own funds and approximately CZK 4,663 more in monthly mortgage payments.

For an older apartment costing CZK 4 million, the buyer would need CZK 400,000 of their own funds, with an illustrative monthly payment of approximately CZK 18,649. A new apartment costing CZK 5 million would require CZK 500,000 of own funds and a monthly payment of around CZK 23,312. The second option may therefore stretch the budget too far for an individual, while it could already be manageable for a couple with two stable incomes.

Half a Million Is a Five-Year Plan, Not a Reason to Give Up

CZK 500,000 is not a small amount, but it does not have to be saved all at once. With a five-year plan for an apartment costing CZK 5 million, the required savings amount to approximately CZK 8,300 per month. For a couple, that works out at around CZK 4,150 per person, and any financial support from family could reduce the amount they need to save themselves.

Building up the required funds can also begin while still studying, with the monthly amount gradually increasing after starting work and as income grows. The key is not to save everything as quickly as possible, but to develop a regular saving habit and allow enough time to prepare.

Renting Is a Long-Term Commitment Too

Those who do not buy their own home will generally pay rent, which can account for a significant share of the household budget, particularly in larger cities. In our example, the monthly payment on a CZK 3.6 million mortgage is CZK 18,649. However, a direct comparison with rent does not tell the whole story, as homeowners also need to account for insurance, repairs, building management costs and a financial reserve. The bank will also assess whether the applicant can safely afford the loan.

Even so, it makes sense to calculate both options based on the individual situation. Rent may increase over time, while mortgage payments remain unchanged during the fixed-rate period. Once that period ends, however, the payment may change depending on prevailing interest rates.

A First Home Can Be a Stepping Stone

Buying a first apartment does not have to be a decision for life. Over the course of several years, a household can repay part of its mortgage, build additional savings, and see both its income and housing needs change.

As the mortgage is gradually repaid, the outstanding principal decreases. If the property also increases in value, a future sale may result in greater equity for the owner. Property price growth is not guaranteed, however, so buying an apartment should make sense primarily as a long-term housing solution rather than a short-term investment speculation.

Homeownership is therefore not about following a single universal path, but rather about finding the right combination of property price, income, personal savings and time. The sooner these variables are calculated in concrete terms, the better a person can assess what kind of purchase is both safe and achievable.

If you would like, we can go through your specific figures with you, determine a safe level of monthly repayments and prepare a plan for purchasing your first home. Contact us.

Disclaimer: This article contains general and illustrative information. Individual options depend on applicants’ income and existing financial commitments, the value of the property, available financial reserves and the current lending criteria of individual banks.

Model assumptions: interest rate of 4.69% p.a., 30-year term, annuity repayments and 90% LTV. The maximum 90% LTV applies to applicants under the age of 36 purchasing a home for their own use; individual banks may require a higher contribution from the buyer’s own funds.

Current LTV rules: Czech National Bank