Hysteresis in the Czech Housing Market: Price Dynamics over the First Complete Mortgage Interest Rate Cycle, 2018–2026

Abstract

The period 2018–2026 offers the first opportunity to observe a complete, closed mortgage interest rate cycle in the Czech Republic: rates fell to a historic trough of 1.98% (March 2021), rose to 5.37% (September 2023) and stabilized around 4.5% from 2025. This paper examines whether the relationship between mortgage rates and housing prices is reversible over such a cycle. The analysis draws on the EVAL software (version 2.0), which has continuously collected and evaluated real estate advertising across all Czech municipalities since 2007, combined with Czech National Bank and Czech Statistical Office data; methods include phase-specific logarithmic regressions, Chow tests, asymmetric difference regressions, cross-correlation analysis and a composite affordability indicator, the Mortgage Payment Burden (MPB). The point estimates are asymmetric: rate increases are followed by lower listing volumes within four months and lower prices within seven, whereas rate cuts show no detectable direct effect; the difference between the two responses is, however, not statistically significant at the available sample size, so the asymmetry is suggestive rather than conclusive. The price–rate trajectory forms an open hysteresis loop—at an identical rate of 4.5%, the median price was 35.5% higher after the cycle than during tightening. Adjustment ran through quantities rather than prices; the correction was deepest in cheap peripheral regions, and by April 2026 the national MPB reached 41.2% of the average wage, its historical maximum—a result that survives plausible alternative wage-growth assumptions. The evidence is consistent with monetary policy acting as an effective brake but a weak accelerator of the housing market, although the reduced-form design cannot separate the effect of rates from that of the concurrent macroeconomic shocks.