Brno to put a brake on ever-increasing property prices
The city will invest in the construction of new residential developments to address the ongoing rise in house prices. Photo credit: Casadei Graphics.
Brno, Jul 23 (BD) – Housing and rental prices have been skyrocketing in the Czech Republic in recent years. The rapid growth in prices has resulted in new and previously-owned apartments becoming more and more inaccessible to the public, including expats living and working in Czech cities.
According to the latest Financial Stability Report published by the Czech National Bank (CNB), house prices have risen faster than disposable income in the Czech Republic in the last few years, making accommodation less affordable for the public and pushing people out of the big cities.
The CNB report indicates that, by the end of 2017, house prices were overvalued by around 14% in the Czech Republic. Throughout most of last year, growth in house prices was the fastest in the European Union. Across the individual quarters of last year, apartment prices rose year-on-year by an average of 16%, according to the report. According to auditors Deloitte, the average price of a “2 + 1 apartment” has risen by about a third in the past seven years, to 3 million CZK. Moreover, a study of the Czech residential real estate market in 2018 by marketing and business consulting agency Conbiz projected a further increase of 7% in the price of new apartments in 2018, which is expected to further reduce affordability of apartments.
Brno is one city experiencing its fair share of rapidly increasing apartment prices. High demand for apartments and a slow approval process for new residential developments in Brno have been adding to the problem of ever-growing housing and rental costs in recent years. However, the second biggest Czech city is to implement measures to solve the problem, according to an article by Markéta Řeháková and Adam Váchal in Hospodářské Noviny (“Brno má recept na dostupné bydlení: Území zasíťuje dopředu a pozemky poskytne developerům, v řešení bytové situace je daleko před Prahou”, published July 18).
According to the article, Brno is to launch a plan to increase the rate of construction of new apartments. “We have allocated 1.5 billion CZK for investment in the development of housing construction, aiming to increase the supply of apartments by 2030,” Petr Hladík, Deputy Mayor of Brno responsible for housing policy told Hospodářské Noviny. “Buying or renting property will be more affordable for the general public,” he added.
The city is to build new roads and connect gas and electricity to areas earmarked for development before construction starts on the new buildings. Part of the plan is that the city will provide the land with basic infrastructure ready, and in return the private sector will make a share of the new flats available for affordable prices. The Moravian capital intends to supply at least 1,500 new apartments a year, of which 15% would remain the property of the city. Brno wants to maintain its current 15% share of the stock of dwellings in the city, according to Hospodářské Noviny. Brno is the first big city in the Czech Republic to attempt such a solution to the problem of rapidly growing accommodation prices. The goal is to attract more people to come and work in Brno, and support pensioners, young couples, and the disabled, as well as providing more options for social housing.
While the City of Brno is adopting new development policies and finding solutions to the problem of ever-rising apartment prices and the shortage of new apartment complexes, the situation in Prague regarding the housing crisis and the high cost of accommodation is still problematic. The capital is yet to find a remedy to address the rising price of apartments. According to Hospodářské Noviny, Prague owns only 5% of the city’s housing stock and plans to invest 3 billion CZK in housing development.
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