Prague – The living conditions in the Czech Republic are currently ranked as the fifth worst in the EU. Although the country maintains its position from last year, certain indicators have shifted. The average cost of an apartment is now approximately 13.6 times the average annual salary, marking the third worst scenario in the EU. Last year, this ratio was 12.9 annual salaries. Conversely, the Czech Republic offers the fifth most favorable rental conditions among EU nations. Approximately 10% of individuals allocate over 40% of their income to housing, a rise from 9% last year, reflecting an increase in the financial burden of housing costs. In this metric, the country has dropped from eighth to the fifth worst position within the EU. These insights come from the Prosperity and Financial Health Index released by Česká spořitelna and the Europe in Data portal.
The index indicates that housing conditions in the Czech Republic remain challenging relative to other EU countries. This year, the Czech Republic is ranked 23rd out of 27 for housing levels, down from 21st in 2022. The index creators highlight that the poor housing situation is largely due to a mix of high costs and limited accessibility. Despite significant investment in residential construction, accounting for 5.6% of GDP—down from 6.2% the previous year—the country still holds the sixth highest share in the EU. In 2022, residential construction represented 4.8% of GDP.
The sharp increase in apartment prices is attributed to a significant demand surplus. Contributing factors include slow construction progress, complicated by lengthy approval processes; as of 2019, it took an average of 246 days to complete such processes, one of the longest durations in the EU. Additionally, high energy costs have raised the price of building materials. “The disproportionate ratio of real estate prices to average wages partly stems from the low wage levels in the Czech Republic, which is reflected in the persistently low unemployment rate,” noted economist Michal Skořepa from Česká spořitelna.
The relatively low rental prices in the Czech Republic compared to other EU countries result from the financial inaccessibility of homeownership. Currently, Czech rents are the fifth most favorable in the EU, improving from being the 13th lowest last year. Skořepa commented, “The tax deductibility of mortgage payments artificially encourages home ownership in the Czech Republic. However, should a housing market bubble occur, prices could inflate beyond fundamental levels, making rental housing seem significantly more appealing.” (September 23)
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