Apartment prices have made the Czechs rich. It is as expensive in Prague as in Milan
Subscribe to our NEWSLETTERS and be in the picture.
From 2010 to the third quarter of last year, Czech real estate prices rose according to the latest Eurostat data by almost one hundred percent. Translated into practice: an apartment in Prague’s Letná, which cost ten million ten years ago, is now worth twenty million. In European comparison, it is one of the highest real estate price ratings on the continent.
At the other end of the scale are properties in Italy or Greece, where prices have fallen by more than a quarter in the last decade. According to last year’s Deloitte report about European real estate costs a new apartment in Prague, just like in the most expensive Italian city of Milan. The price of a new Brno apartment is comparable to that in Rome, and Ostrava’s real estate is about as expensive as the one in Turin. Ten years ago, few would have believed such a development.
Eight out of ten Czechs make money
More expensive housing was added to the total wealth of Czech households. This is mainly due to the fact that owner-occupied housing is still very strong in the Czech Republic. According to Eurostat data from 2020 up to 79 percent of Czechs live on their own. It can therefore be stated that eight out of ten Czechs benefit from the current increase in real estate prices. And not much. The price of own property in a large number of cases is the most valuable thing that the average Czech family owns.
The large share of one’s own housing in the Czech Republic is, of course, the result of the privatization of the state and municipal housing stock after 1989. Today, this privatization is often criticized for the ridiculous selling prices of flats at the time tenants and also for the corruption. In the long run, however, it was really “people’s privatization that made public property a great transfer”, but not only the “happier and more capable” ones, but also the middle and lower classes.
Most Czech society can still be affected by the increase in reality prices. And it is this privatization of most households that the Czech wealth is rapidly approaching that of Western countries.
Who will inherit
However, the current situation, in which increasingly valuable real estate is the most expensive active held by Czech households, may deepen property differences. Especially in the generation entering the labor market. The wealth of these people will no longer depend so much on how much money they can earn their own jobs, but on whether they inherit any property. For example, after the ancestors who managed to privatize it in the 1990s.
People who are lucky will also have better access to more credit, and their wealth will continue to increase faster than people who do not inherit any property. This future development may also have a significant impact on the country’s political stability.
The ideal solution to protect the abysmal differences in the wealth of individual households seems to be the renaissance of cooperatives and the support of federal housing, the so-called baugruppe according to the German or Swiss model.
Cities can support similar projects, for example, by providing municipal land in exchange for the profit of several new flats, which can then serve as social housing for the poorest citizens or preferred professions. In large cities, it is no longer worth building a large portfolio of municipal housing, but rather supporting the initiatives of groups that want to achieve some form of owner-occupied housing.