The price aspects of housing (Prices) Ing. David Slavata, Ph.D. Housing Economics

The kinds of prices in CZ Market prices Cost prices Maximal prices Time direct prices Stop prices

Most of prices in CZ are based on the market prices. Only supply and demand determine the result price. Example: Prices of flats, houses, land, cars etc. Some of goods are under price regulation. Most of flat rents are market based. Some of rents are regulated.

Payments in Housing Owner of the flat payments Rents Rents Tenant payments Tenant payments

Payements for owner Payement = Flat expences (house) + Aadvance Payments Flat expences (house) = repairs + tax + funds + land rent + administration + accounting + inspections + mortage Profit = Rent(reven.)-Costs (expences)

Tenant Payements Payement = Net Rent + Advance Payments, Deposit Net rent = rent per m 2 x area of flat + rent from facilities Advance Payements = water + gas + electricity + waste +….

Three kinds of determinantion Rent per m 2 _______________________________ Adm. regulat. CostMarket Selected CooperativesOthers cities

Rent regulation P Q D S P1 P2a Q1 Qd Qs

New housing construction in CZ

Administrative regulation Tradition from 1914 in CZ Expecting end 2013 in CZ Housing list situation in 70s and 80s Demotivated for individual activity in the field of construction Bigger demage than first and second world war The owner must respect the charge set by the government (low) The owner must respect the charge set by the government (low) Disbalance in low protection

Typical points of Czech rent regulation Price regulation Legal regulation by civil code

Prices - overview rent regulation 1918 – 1938step by step deregulation 1939 restoration of rent regulation 1953 currency reform in cz 1964new civil code - 2Kč/m Kč/m Kč/m2 1993rent deregulation law 19945,5Kč/m ,76Kč/m ,50Kč/m ,70Kč/m ,90Kč/m ,39Kč/m ,25Kč/m ,98Kč/m2 2006new rent deregulation law Kč/m2 2012End of regulation100Kč/m2

Comparison - regulated and market rents in EUR/m2/month

Disbalance in Legal regulation Civil code Low or no possibility to give a notice to tenant (only by decision of the court) In case of notice the obligation to provide compensation (new flat) The owner must respected even non payer Families with children were untachable Owner must respect the regulated rents No barriers for tenant – notice without reasons

Impact of rent regulation in CZ Latent shortage of flats during 100 years in CZ GraynessInequity Poor quality buildings No efective distribution No efective construction Antagonistic clases – owners and tenants

Before rent regulation around 1900 Art style

Influence of rent regulation 2012 Post socialist ruins

Poor households Subsidies Municipal flats Private hostels Reception centers for homeless

Problem of increase of rents after deregulation in case of indefinitely agreement 1.Agreement proposal to tenant 2.Two month term for acception of the proposal 3.In case of no acception three months term for civil action 4.The rent is determinate by court on the level of market rent.

Determination of market rent by the court The map of market rents Expert statement Submitting of minimal three valid agreements from the same house by the owner Submitting of pay bills which documents repairing of flat or house

Cost rent Tenant (shareholder of coop.) Pays the rentAgreement Cooperative (owner of flat)

Cost rent Rent = mortage + Repairs + Administration + Insurance + Taxes + Rent of land + Last year loss from housekeeping

Impact of cost rent in CZ housing Well maintained housing fond in comparison with administrative regulated houses during the term of rent regulation Relationship of coop members to their house

Market rent Rent = f (P, F, N, Sch,…..) The rent is determinate by many kinds of factors. The rent is determinate by many kinds of factors.

The main factors PlaceNeighbourhoodInfrastructure City transport ServicesEducations Health care services Public offices Labour market Population

Flat Prices in CZ Indexed

Urban development in Ostrava previous

Avredge price of flat in Ostrava in USD

Avredge rent in Ostrava

Rate of profit (above) vs hyp. interest (below) in %

The main chracteristics of the situation The prices are affected by the financial crise The market system after 100 years is balanced Supply exceeds demand There are no possibilites to reach oversized profit Balanced law protection of tenants and owners Participation of private sector on social housing (opportunity for enetrepreneures) High rate of flat reserves

Future of housing market The rise of service prices conected with housing (gas, electricity, water….) New construct technology Getho problems – concentration of poors Vacant flats Privatisation of state housing stock Changes in quality structure of tenants (partly financial weak hoseholds) Demography