Impact of Interest Rates on the Real Estate Market in Prague

Abstract

The development of housing prices and interest rates is among the key issues influencing housing affordability and the stability of the real estate market. The aim of this thesis was to examine the impact of interest rates on the development of average apartment prices in Prague over the period 2015–2025 and to assess whether this impact occurs immediately or with a time lag. To achieve this objective, correlation analysis and Granger causality analysis were applied to quarterly secondary data. The results confirmed the existence of a statistically significant relationship between the examined variables and demonstrated a one- way, time-lagged effect of interest rates on apartment prices, with the strongest impact occurring approximately after one year. The contribution of the thesis lies in identifying the temporal dynamics of the effect of interest rates on housing prices, which may be useful for decision-making practice. A limitation of the study is the use of aggregated data for the territory of the City of Prague and the exclusion of other factors influencing housing price development.