Prague – The conditions for living in the Czech Republic are now the fifth worst among EU countries. Although the Czech Republic is in the same position in the ranking as last year, some indicators have changed. The average apartment now costs about 13.6 times the average annual salary, which is the third worst result in the EU. Last year, it took 12.9 annual salaries to purchase an apartment. In contrast, compared to other EU countries, the country has the fifth most favorable rental housing. About one-tenth of people spend over 40 percent of their income on housing, last year nine percent of households were significantly burdened by costs. In this indicator, the Czech Republic was also in the fifth worst position among EU countries, last year it was in eighth place. This is according to this year’s Prosperity and Financial Health Index prepared by Česká spořitelna and the Europe in Data portal.
According to the index, the conditions for housing in the Czech Republic remain among the most demanding in the EU. This year, the Czech Republic ranked 23rd in housing level among the European 27, whereas in 2022 it was in 21st place. The creators of the index point out that the poor level of housing in the Czech Republic is primarily due to a combination of inaccessible housing and high household costs. The creators of the index noted that housing availability has decreased despite the fact that the Czech Republic spends significant amounts on residential construction. It accounts for 5.6 percent of GDP, which is a decrease of six-tenths of a percentage point compared to the previous year, but it is still the sixth highest share in the EU. In 2022, the Czech Republic invested 4.8 percent of GDP in residential construction.
According to the index, the high prices of apartments are due to a significant excess of demand. Several factors contribute to this. One of them is slow construction, caused by long approval processes, for example. According to the latest publicly available data from 2019, it takes 246 days in the Czech Republic, which was one of the highest values in the EU at that time. High energy costs, which are reflected in the price of building materials, also increased expenses. “Regarding the high share of real estate prices to average wages, it is partly a consequence of the low level of Czech wages, as evidenced by the long-term extremely low unemployment here,” said economist of Česká spořitelna Michal Skořepa.
Favorable rents in the Czech Republic compared to the EU are largely due to the financial inaccessibility of owning property. While this year Czech rents are the fifth most favorable in the EU, last year they were the 13th lowest value. “In the Czech Republic, home ownership is artificially favored by the tax deductibility of mortgage payments. However, if a bubble forms in the housing market, it can raise prices so high above the fundamental level that rental housing may start to appear distinctly more advantageous,” Skořepa added. (September 23)
