ANALYSIS OF THE HOUSING AFFORDABILITY AND ITS COMPARISON BETWEEN CZECH REPUBLIC AND LITHUANIA Ing. David Slavata, Ph.D. Department of Public Economy Faculty of Economics, VŠB – TU Ostrava LITHUANIA, ERASMUS 2018 Alytus – 7. 11. 2018

The Aim of the Lesson To analyze housing affordability in selected European countries and to compare it with the situation in Czech Republic and in Lithuania. To compare and analyze historical real estate market data of Czech (Czechoslovakia) To indicate present overvaluation or undervaluation of flats in Lithuania and in Czech Republic.

The questions In which of our countries there is higher probability of housing affordability? If you would have 150 000 EUR, in what country you would prefare to invest to reach higher profit? In what of our countries there is higher risk of housing price decrease?

The House Price Index by Eurostat (2015 Q1 = 100)

The Indicators PI ratio = P / I PGDP ratio = P / GDP PW ratio = P / W MI ratio = M / I PR ratio = P / R OUn = (P/In + P/Rn) – sum ((P/I + P/R)/N) / sum ((P/I + P/R)/N)

We need to indicate: Flat prices Monthly payed rents Salaries

The Data Sources www.czso.cz www.trzniceny.cz Eurostat www.numbeo.com

Flat Prices in EUR Country City center price m2 Outside of center price m2 City centre rent one bedroom month Outside of city rent month Lithuania 1981,24 1237,96 408,00 254,87 Latvia 1568,24 963,57 346,67 248,12 Estonia 2221,56 1480,92 451,91 315,48 Czech Republic 3233,83 2245,01 512,25 392,25

Salaries and rate of interest Country net slary EUR Int. rate % Lithuania 699,05 2,10 Latvia 674,75 2,65 Estonia 1002,64 2,63 Czech Republic 890,9 2,37

Rental Yields in % Rental yields City centrum Outside of city centrum Lithuania 4,24 4,29 Latvia 4,68 5,33 Estonia 4,3 4,43 Czech Republic 3,34 3,63

Country P/I P/GDP centre P/W centre M/I P/R centre value rank Czech Republic 14,14 3 6,68 11 27,47 87,33 5 28,3 7 Latvia 9,9 14 4,48 24 16,22 17 63,8 16 21,69 19 Lithuania 11,92 4,91 20 22,09 72,82 8 23,33 15 Estonia 9,17 5,27 16,95 58,62 22 22,84

P/I P/GDP centrum P/W centrum Country P/I P/GDP centrum P/W centrum M/I P/R centrum value rank Ukraine 15,2 1 8,0 3 29,1 2 319,6 15,4 30 Albania 14,5 7,2 5 29,5 124,6 23,7 13 Czech Republic 14,1 6,6 11 27,4 87,3 28,3 7 Belgium 7,0 28 4,8 22 11,3 43,5 19,5 23 Denmark 29 10 9,9 43 22,8 16 Cyprus 6,3 3,4 7,4 46,4 27 16,9

Average Country Overv., under. in % city centre areas Overv., under. in % outside of centre Average value rank Czech Republic 31,75 32,55 32,15 2 Lithuania 7,6 10,73 9,16 9 Estonia -2,6 0,84 -0,88 15 Latvia -6,87 -10,44 -8,65 20

Country Over/under val. % centrum Over/under val. % outs. centrum Average value Rank France 39,99 33,01 36,50 1,00 Czech Republic 31,75 32,55 32,15 2,00 Sweden 29,71 24,37 27,04 3,00 Croatia 18,32 25,42 21,87 4,00 Netherlands -16,77 -17,18 -16,97 27,00 Malta -16,87 -18,91 -17,89 28,00 Ireland -29,34 -31,82 -30,58 29,00 Cyprus -35,57 -30,30 -32,94 30,00

Historical Annual Wages 1861 - 1943

Average Price Per One Flat Family House

Annual Rents 1861 - 1943

Comparison to the level of present prices of European countries: +32,15% Comparison to the level of historical Czech (Czechoslovak, Habsburk Empire) prices: +36,11 %

Reasons of overvaluation in Czech Republic Mortgage interests Increase of wages Demographical aspects Impact of monetary policy

Reasons for overvaluation of flats in Lithuania Restrictions for buing of real estates (?) Mortgage interest Transfer of finances from abroad

The answers In which of our countries there is higher probability of housing affordability? If you would have 150 000 EUR, in what country you would prefare to invest to reach higher profit? In what of our countries there is higher risk of housing price decrease?

Thank You for Your Attention