Thanks to the clear datasets published at the turn of April and May, we now have a unique opportunity to see how Czechia is faring in comparison with other relevant countries. The OECD data covers both its member countries (38 in total) and states that aspire to OECD membership – for example Ukraine, Romania, Bulgaria and Croatia, but also most of the large South American economies. For selected indicators, there is also a comparison with the relevant economic “competition” on the global stage, such as Russia, China or India. All indicators are calculated as a ten-year index with 2015 as the base year. In the text below, however, we will work with a derived percentage figure, which illustrates the rise in prices and thus the worsening affordability of owner-occupied and rental housing in Czechia over the past decade. So how does our country fare in the individual indicators, and which countries – whether neighbouring or on the other side of the world – stand out in an exceptional way? Careful: the higher a country ranks, the worse it performs in the given indicator!
Before we dive into the data, it is worth recalling that the OECD’s aggregated datasets can never capture all local and regional specifics
Nominal flat prices: 7th place (out of 45 tracked)
Compared with 2015, flats in Czechia have risen in nominal terms by 122 %. A typical three-room unit in the broader centre of Prague that cost 4 million Kč ten years ago is now worth almost 9 million Kč. Even higher nominal growth was recorded in Hungary, Lithuania and Russia, yet no one comes close to the record holder, Turkey. There, a period of hyperinflation pushed nominal flat prices up by a barely believable 1,621 %. Yes, you read that correctly. Real flat prices: 10th place (out of 45 tracked) Once external factors are taken into account – wage growth, inflation or changes in consumer baskets – Czechia ranks a slightly better 10th – but we are still in the worst quarter of all the economies tracked. This indicator should be the most alarming signal for the Czech government that the situation is far from ideal (and the plans of the favourites in the autumn elections do not promise a quick fix so far). In real terms, flats here now cost 48 % more than ten years ago, while the European Union average was 16 %. In two EU countries, the real purchase price of property has even fallen over the past decade – Finland and Italy.
The state of the Czech property market can be summed up with the TV series line “not great, not terrible” – things could be significantly worse, but our goal should certainly be to aim higher and improve housing affordability while maintaining the pace of economic growth
Nominal rent levels: 13th place (out of 40 tracked)
According to OECD data, rent growth is not yet tracking the growth in property purchase prices to the extent we might have expected. Over the past ten years, rents in the Czech Republic have risen by 40 %, which is actually “fine” compared with 66 % in Poland, 70 % in Slovenia or 87 % in Hungary. It is interesting to note in the ranking that the problem barely affects Western European economies – in Germany, for instance, rent growth was a mere 15 %, in Switzerland 11 % and in France just 7 %. There is only one country tracked where rents have fallen over the past decade, and that is Japan, which is heading into a demographic crisis somewhat ahead of the others.
Price versus rent: 11th place (out of 39 tracked)
And finally, an indicator that is perhaps the most interesting of all for property investors. It shows how the ratio of flat purchase prices to rental income has changed over the past ten years. In other words, where it is currently attractive to own property (but careful – not to buy it!). Given that the data has already confirmed that rents in Czechia have not grown as quickly as flat prices over the past decade, we are not among the most attractive countries within the OECD economies and associated partners. Paradoxically, the most interesting of them is the aforementioned Finland, where flats rose nominally by 1.7 % but rents by 17.2 %. Unfortunately, the “standardised price-rent ratio” indicator, which would show not only the change but also the actual current ratio of purchase prices to rents, is not measured by the OECD in Czechia.
The land of a thousand lakes may in reality be more the land of a thousand investment flats
Just to be sure, we will repeat once more that all the data is relative to 2015 (it is an index – a ten-year change). To make a well-informed investment decision, you therefore need to work with a far larger body of data and decide in the broader context of the actual purchase prices of individual investment assets in the given country, while also taking into account the related legislation and tax conditions. Examples of cheap and expensive flats abroad, as well as extremely high and low property taxes, can be found in our earlier article devoted solely to this topic. Are you considering buying an investment flat, or do you already have one in your portfolio? Would you like to keep an eye on property prices and rent levels but have no time for it? Leave the care of your investment assets to the experts. The FLAT SERVICE team includes specialists who have been working in the property market and professional property management for 20 years, and we will be happy to take all the unpleasant worries off your hands. Find out more about our Partner and Garant services on this website, at info@flatservice.cz or on +420 277 000 330.
