A Prague resident would need to spend 14.2 years’ salary for a medium-size apartment (70 square metres), if having no other expenses, according to a new study based on statistics compiled by three leading property developers.
According to statistics compiled by developers Trigema, Skanska Reality and Central Group, the average price of a new flat sold in the Czech capital has risen by 88 percent since mid-2015, but by just 1.6 percent in the past year, to 106,392 crowns per square metre.
Central Group owner Dušan Kunovský said demand for new Prague flats has long outstripped supply mainly due to the lengthy approval process for construction, which can take 10 years in the case of an apartment building.
In addition to the pace of issuing building permits, analysts cite the rising prices of land, construction work and materials, as well as a high tax burden, as the cause of this whopping increase.
The developers say the price of an average flat with an area of 70 square metres now stands at 7.84 million crowns while as of end-March the average gross monthly wage in Prague was 45,947 crowns. According to Kunovský, wage growth contributed to a year-on-year increase in housing affordability of 0.4 percentage points.
Still, compared to large cities in central Europe, new Prague housing is by far the least affordable. In Bratislava, is would take 11.9 years’ salary to buy a new flat, in Munich (11.8 years), Vienna (8.7 years), Warsaw (8.5 years) and Berlin (8 years).
According to Central Group, in the past five years Prague authorities approved the building of 3.4 flats per 1,000 inhabitants, compared to 6.5 in Berlin, 7.5 in Munich, 8.4 in Bratislava, 8.7 in Vienna and 13.1 in Warsaw.
The Czech government has pledged to speed up and simplify the permits process with a new construction code that should take effect within two years. Critics charge it benefits developers but does not protect the public interest.
The coronavirus crisis is not likely to cause a fall in property prices in the Czech Republic this year, but sluggish sales are likely, according to the Association for the Development of the Property Market. Some analysts say the construction sector, which is not so dependent on foreign trade, could become a motor of economic recovery after measures to contain the spread of coronavirus have ended.