In Europe, the road to obtaining an apartment is the most difficult in the Czech Republic. It was difficult before the pandemic, and it would seem to be even more difficult now. Prices of apartments and houses in Prague and other larger cities are soaring.
According to the Property Index study of the Deloitte consulting company, Czechs need to work 11.4 years for an average salary to purchase their own apartment with an area of 70 square meters.
Germans will reach comparable housing in 5.1 years, Poles in 7.7 and Hungarians in 7.6 years. The situation in Prague is even more acute. In the unavailability of housing, neighboring Austria is getting close to the Czech capital, where ten annual average salaries are needed to purchase an apartment, and Slovakia, where it is 9.9 salaries.
The latest data on apartment prices are from the third quarter of last year. Prices continued to rise sharply despite the coronavirus pandemic. The price of houses and apartments rose by 4.9 percent in a year. Real estate prices are thus growing even faster than prices of goods and services, which rose by 3.1 percent. It is the fourth-highest price increase in the entire European Union at the time of the pandemic. The average price of a square meter apartment is 70,300 korunas (€2,758). The apartment with an area of 70 square meters will cost almost 5 million korunas (€196,200).
Build, build, build
The Covid-19 pandemic has further exacerbated trends that have long affected the housing market. Wages in the country have risen despite the economic downturn. However, shops were closed, the services did not work. It was impossible to travel. The only option was online shopping – and it was growing rapidly.
But overall, people spent much less and increased their savings. And as the government began to accumulate huge debts, prices shot up. People have begun to fear that inflation will devalue their money, and they started looking for a way to save it safely. And real estate in the Czech Republic, where people are not used to taking too much risk with their money and investing in stocks, for example, is a very safe and at the same time profitable appreciation of savings.
Moreover, with rising inflation, it is increasingly likely that the Czech National Bank will raise interest rates, making mortgages more expensive, which has left people wanting to buy houses and apartments while they are still low. Czechs have long been one of the countries where a large part of the population lives in their own apartments and long for them. At the same time, compared to other countries, there are not enough apartments and little construction. All this together is the perfect constellation for soaring property prices and the least affordable housing in Europe.
There are 460apartmentsper thousand inhabitants in the Czech Republic. This is below the European average. In neighboring Germany, it is 511.8apartments, in Austria 541, and in Italy 581. Portugal has the most apartments and houses per thousand inhabitants at 582. It is no coincidence that this country, which is now much poorer than the Czech Republic, has the most affordable housing in Europe. A Portuguese with an average income needs four annual salaries for an average apartment of 70 square meters. The Czechs have to work for the same apartment for the aforementioned 11 and a half years. The relationship between the number of apartments and their availability is visible at first glance. Therefore, real estate prices in the Czech Republic are growing at an above-average rate by European standards.
The poorer the country, the more people own an apartment
The European comparison also clearly shows how insufficient the construction in the Czech Republic is. Last year, an average of 3.62 apartments per thousand inhabitants began to be built. In Poland, where housing is significantly more affordable, it was 6.18 apartments, and in France 6.12. The good news is that construction is accelerating at least a little.
The numbers of people living in their own houses and apartments vary considerably across Europe. The poorer the country, the more people live in their houses and apartments.
In general, the rich west and north of Europe have far more people renting apartments than the poorer east and south of the continent. In the European Union, 69.7 percent of people live in their own apartments and houses on average, with the most in poor Romania, where it is 95.8 percent. It is followed by Hungary with 91.7 percent and Slovakia with 90.9 percent. Except for Malta, only the post-communist countries of Central and Eastern Europe are among the largest owners of property. The history of many years of foreclosure might be one of the reasons why so many people live in their own houses in this part of Europe.
At the opposite end, there are the richest countries in Western Europe. In Switzerland, only 41.6 percent of people live in their own house or apartment, 51.1 percent in Germany, 55.2 percent in Austria, and 60.8 percent in Denmark. The richer the country, the fewer owners. These are all countries where, unlike Central Europe, the housing market works well. It is the lively, competitive market that significantly decides when young people move away from their parents. In rich Western and Northern Europe, children move out from their parents many years earlier than in the poorer central and southern parts of the continent.
The result of all these trends is soaring house and apartment prices. They have risen by 59.5 percent since 2015. The average salary in the economy rose by only 51.5 percent over the same period. Therefore, housing in the Czech Republic is far less available from year to year.
Title image: In this picture taken Tuesday, Oct. 3, 2017, a woman walks past a new apartment building that is being constructed in Prague, Czech Republic. The Czech Republic’s capital has the hottest residential property market in Europe, and it’s becoming a problem. (AP Photo/Petr David Josek)