How is it possible that you sell apartments abroad for half of Prague prices?
There is very strong competition in all foreign markets where we do business and far more projects, companies and, ultimately, flats on the market. The competition is holding each other in check. This is not in Prague. Last year, the authorities allowed the construction of 3,200 flats in apartment buildings here, and this is, of course, completely insufficient, in Warsaw it is many times more.
In an open market, you don’t have to know who is sitting in the town hall. You simply buy the land, prepare the project in accordance with the zoning plan, and you can be sure that the authorities will discuss and approve it within the deadlines. In Warsaw, we have experience with our construction, where we applied for a building permit on 20 November and received it on 31 December. At the first stage of the project of a thousand flats, we waited for six weeks for a permit within a one-stage procedure. It would take six years in Prague, and even better.
And why isn’t there more apartments on the market in Prague?
Tens of thousands of flats are waiting for permission, but there is only a minimum of them on the market. For such a large city as Prague with 1.5 million inhabitants, the units of a thousand new flats a year are terribly few. And it didn’t just happen last year, it’s basically been happening for 10 years now, so there’s an unsatisfied demand from those past years. The new construction company should make sure that the tens of thousands of flats that are waiting in the endless permitting process get on the market in ten or five years, but no later than a year. It’s still not like Poland in six weeks, but it’s progress. But if the new government changes the law again, we don’t have to wait for improvement.
UDI Group Strategy Director Marcela Fialková
Photo: Law Archive
Why do you think? The Coalition Together and PirStan claim that they just want to change it for the better…
Leaving building offices in municipalities is not for the better. Municipalities have to influence the construction on their territory at the level of spatial planning. However, the licensing itself is to take place in the regime of an independent state administration. Each landowner has the right to have his project decided by an independent official. Of course, this does not happen if the official is an employee of the municipality and is also a party to the proceedings.
Decision-making should not be influenced by politicians who run municipalities right now. Next year they will be run by someone else and they will have a different interest. It is a huge area of corruption that has gotten us where we are now with building permits – among developing countries. If the new government wants to act purely in favor of the mayors, it is a great disappointment to me.
Can housing prices be reduced by construction under the direction of municipalities or the state?
Neither the state nor the municipalities can build. We have already seen this in many examples, most recently in Černý Most, when Prague got even above the current market sale price with the construction costs of the project, and in the end it had to whistle the project. Condition affordable apartments, this is an art of its kind. You need to have the know-how to design the layout of the apartments to work, and at the same time to effectively extract the material of the building that you have available.
Today, each m2 of an apartment in Prague costs an average of 125,000 crowns. You can buy a car for three m2 of the apartment, which will also come out in the hall, for example, to an inexperienced architect. Not every architect can design the layout of apartments effectively. Like anything else, people who have many years of daily experience can usually do it better, and these are architects who have been specializing in developer work for decades.
So should even the available flats be built by developers?
The state already imagines that it wants to build affordable housing in the form of PPP projects. It is good that I know that he cannot do it alone, but in cooperation with the private sector. However, he should not only create a methodology, and give it to the municipalities to be able to compete with concessionaires, but above all he should select some proven available apartment building projects. They would then offer their detailed project documentation to the municipalities and the municipalities would choose a house, the designer would only plant it in a specific plot of land and the municipality could already compete, for example, only a construction company. This would only bring competition and construction at interesting prices. Local construction companies could be involved in the regions.
You have offered municipalities the construction of apartments for 40 thousand CZK per square meter. Are you interested in them?
A year ago, we offered Prague and the state a solution that could be a quick way to affordable apartments. We want to show that it is possible to build at these prices in our country as well. We live here in the idea that it is not possible. But we realize that at the same cost as our colleagues in Prague, we sell apartments in Poland for 55 to 65 thousand crowns per square meter, ie for half of Prague prices, and we still have a 20 percent margin there. So it works, even in commercial mode.
And it would be possible here in the Czech Republic as well, only the municipalities would really have to want to. We usually find that the city districts of our offer are enthusiastic, but it is ruined by the incredible bureaucracy and complexity of the process that accompanies the municipality. It is basically unthinkable to realize anything in our country in cooperation with the private sector. That is what needs to change. We are not giving up yet. In fact, we want to help cultivate our domestic market, which is paradoxically the least transparent of all where we do business.