Czechia's housing market among least affordable in Europe
According to the latest Deloitte Property Index, Czechia ranks as the second-most expensive country in Europe to buy property when adjusting for salaries. The situation is equally dire for renters, with rent prices nearly doubling between 2005 and 2020, making Czechia one of the least affordable rental markets in Europe. I asked Vladimír Vaňo, Chief Economist at GLOBSEC, about the factors contributing to these rising costs.
“I would split this question into long-term factors and short-term factors. The short-term factors are that the construction costs have increased due to the commodity shock following the Ukraine invasion and, at the same time, due to the higher inflation the Czech National Bank tightened the monetary policy, which increased interest rates, which increased mortgage rates and made the new mortgages less available.
“But in the long-term, Czechia is one of the countries with the least affordable housing in Europe, per the Developed Housing Affordability Index. When we look at the statistics, we see that the rent of Czechia has increased by almost 100 percent between 2005 and 2020, which – among the OECD countries – is the fifth fastest growth of rent ahead of countries like Hungary, Poland, or Slovakia.”
How do you see the housing situation evolving in the next few years if current trends continue?
“What is necessary in my opinion is a reconfiguration of the concept of rental housing including the public rental housing and there Vienna can serve as a feasible role model. Vienna is the biggest dwelling owner in Europe with an excess of 300 apartments owned by the city and renting them at acceptable rates to citizens.
“But then when we look at the availability and supply of new housing supporting the rental markets. This, in the short-term, is the most important initiative. And here we see that the Ministry of Labor and Social Affairs in collaboration with the Ministry for Regional Development is looking at the housing support law, which is aimed at increasing housing availability and providing assistance for those in emergency housing situations and also cutting the red tape, so to speak, and making it easier to get permits, build new apartments, incentivizing construction, and social housing initiatives.
“One controversial measure, which Berlin has been experimenting with, is rent control measures but that is something that did not seem to bring immediate impact. Not only Berlin but also Vienna is tackling how to regulate this market for short-term rentals in such a way that local inhabitants can rent apartments at affordable prices.”
