The biggest problem in Prague is expensive housing, residents decided
In Prague, the demand for housing has long been well above the supply. The main reason is the slow permitting of new construction, which lasts more than ten years. In transport constructions, often even longer. The combination of lengthy approvals and growing demand for real estate has led to a rapid rise in prices in the metropolis in recent years.
Over the last ten years, the construction of 39,000 flats has been permitted in Prague, ie less than four thousand a year. For example, in Prague 1 and Prague 2, no new apartment building received a stamp. “At the same time, Prague needs to allow at least ten new thousand units a year, ie twice as many as today,” says Michaela Tomášková, executive director of the Central Group development company.
The lack of flats and the related high housing prices are perceived as the main problem by Prague and the public, specifically 63 percent of people. Almost 26 percent of Praguers rate the current state of traffic as the worst. This is shown by a survey by the Ipsos agency, which conducted it for the Central Group in September this year and which was attended by a thousand respondents. The developer obtained the data exclusively provided by the News List.
New apartment for 14 annual salaries
The results of the survey also correspond to the conclusions of the CG-Index developers study, which regularly monitors the availability of housing in Prague and the surrounding metropolises. The Czech capital – or rather its inhabitants – are the worst off in this respect. To purchase a normal new apartment, the average inhabitant of Prague would have to explain his annual gross salary for 14.2 years. In Vienna, for example, people reach the same apartment almost six years faster.
Task for twenty years
However, the lack of flats is not caused by developers – according to the analysis, they have almost 116,000 of them in preparation in Prague, and 45,000 of them are already in some stage of the approval process. Their wider marketing, which would reduce prices but prevent slow licensing.
At the current rate, it would take more than 20 years to allow all the apartments being prepared. Compared to the Czech Republic, it is doing much faster in neighboring countries. In Prague, on average, only about three new flats per 1,000 inhabitants are licensed each year, while in Munich, Bratislava or Vienna it is two to three times as much.
“A higher pace of permits would, in addition to satisfying the demand for housing, also mean a much-needed injection for the entire construction industry, which accounts for almost 10 percent of our country’s GDP. Moreover, investment will be what it can kick back in the weakened economy after the crisis. Therefore, administrative obstacles and lengthy processes must not be encountered, “requires Tomášková.
In addition to speeding up approval processes, any reduction in the burden of housing, such as a reduction in VAT from 15 to 10 percent, would make a significant contribution to tackling the unavailability of housing. This alone would save the buyer around 300 thousand crowns for an average apartment in Prague.
Prospects for better times
The vision of improvement is promised by the new building law, which in its current wording is not ubiquitous, but represents significant progress compared to the current situation. The looming agreement between Prague’s city districts, the municipality and developers, which would give their cooperation clear rules, could also help unblock construction in Prague.
Developers would contribute to the public investment fund and the money from it would go to the places where it is built for specific purposes. At the same time, this would eliminate the frequent opposition of local governments to new construction.
Today, the state receives about a million crowns in taxes from the average new Prague apartment, but almost nothing from the local government. At the same time, cities and municipalities bear the greatest burden associated with new construction, whether it is transport and technical infrastructure or civic amenities such as schools and kindergartens. When they do not have enough money from new construction for related investments, it is logical that they often resist it.