The price aspects of housing The price aspects of housing (Prices)(Prices)

Ing. David Slavata, Ph.D.Ing. David Slavata, Ph.D.Housing EconomicsHousing Economics

The kinds of prices in CZThe kinds of prices in CZMarket pricesMarket pricesCost pricesCost pricesMaximal pricesMaximal pricesTime direct pricesTime direct pricesStop pricesStop prices

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

Payments in HousingPayments in HousingOwner of the flatOwner of the flat payments payments

RentsRents

TenantTenant payments payments

Payements for ownerPayements for ownerPayement = Flat expences (house) + Payement = Flat expences (house) +

Aadvance PaymentsAadvance Payments

Flat expences (house) = repairs + tax Flat expences (house) = repairs + tax + funds + land rent + administration + funds + land rent + administration

+ accounting + inspections + mortage+ accounting + inspections + mortage

Profit = Rent(reven.)-Costs (expences)Profit = Rent(reven.)-Costs (expences)

Tenant Payements Tenant Payements

Payement = Net Rent + Advance Payments, Deposit

Net rent = rent per m2 x area of flat + rent from facilities

Advance Payements = water + gas + electricity + waste +….

Three kinds of determinantionThree kinds of determinantionRent per m2

_______________________________

Adm. regulat. Cost Market

Selected Cooperatives Others cities

Rent regulationRent regulation

P

Q

D S

P1

P2a

Q1 QdQs

New housing construction in CZNew housing construction in CZ

Administrative regulationAdministrative regulationTradition from 1914 in CZTradition from 1914 in CZExpecting end 2013 in CZExpecting end 2013 in CZHousing list situation in 70s and 80sHousing list situation in 70s and 80sDemotivated for individual activity in the field Demotivated for individual activity in the field of constructionof constructionBigger demage than first and second world Bigger demage than first and second world warwar The owner must respect the charge set by the The owner must respect the charge set by the government (low)government (low)Disbalance in low protectionDisbalance in low protection

Typical points of Czech rent Typical points of Czech rent regulationregulation

Price regulationPrice regulation

Legal regulation by civil Legal regulation by civil codecode

Prices - overviewPrices - overview1914-19181914-1918 rent regulationrent regulation1918 – 19381918 – 1938 step by step deregulationstep by step deregulation1939 1939 restoration of rent regulationrestoration of rent regulation1953 1953 currency reform in czcurrency reform in cz19641964 new civil code - 2Kč/m2new civil code - 2Kč/m219911991 2Kč/m22Kč/m219921992 4Kč/m24Kč/m219931993 rent deregulation lawrent deregulation law19941994 5,5Kč/m25,5Kč/m219951995 6,76Kč/m26,76Kč/m219961996 8,50Kč/m28,50Kč/m219971997 12,70Kč/m212,70Kč/m219981998 15,90Kč/m215,90Kč/m219991999 17,39Kč/m217,39Kč/m220002000 18,25Kč/m218,25Kč/m220012001 18,98Kč/m218,98Kč/m220062006 new rent deregulation lawnew rent deregulation law20102010 60Kč/m260Kč/m220122012 End of regulationEnd of regulation 100Kč/m2100Kč/m2

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

Disbalance in Legal regulation Disbalance in Legal regulation Civil code 1991 - 2005Civil code 1991 - 2005

Low or no possibility to give a notice to tenant Low or no possibility to give a notice to tenant (only by decision of the court)(only by decision of the court)In case of notice the obligation to provide In case of notice the obligation to provide compensation (new flat)compensation (new flat)The owner must respected even non payerThe owner must respected even non payerFamilies with children were untachableFamilies with children were untachableOwner must respect the regulated rentsOwner must respect the regulated rentsNo barriers for tenant – notice without reasonsNo barriers for tenant – notice without reasons

Impact of rent regulation in CZImpact of rent regulation in CZLatent shortage of flats during 100 years Latent shortage of flats during 100 years in CZin CZGraynessGraynessInequityInequityPoor quality buildingsPoor quality buildingsNo efective distributionNo efective distributionNo efective constructionNo efective constructionAntagonistic clases – owners and tenants Antagonistic clases – owners and tenants

Before rent regulation around Before rent regulation around 1900 Art style1900 Art style

Influence of rent regulation 2012Influence of rent regulation 2012Post socialist ruinsPost socialist ruins

Poor householdsPoor householdsSubsidiesSubsidiesMunicipal flatsMunicipal flatsPrivate hostelsPrivate hostelsReception centers for homelessReception centers for homeless

Problem of increase of rents after Problem of increase of rents after deregulation in case of indefinitely deregulation in case of indefinitely

agreementagreement

1.1. Agreement proposal to tenantAgreement proposal to tenant2.2. Two month term for acception of the Two month term for acception of the

proposal proposal 3.3. In case of no acception three months In case of no acception three months

term for civil actionterm for civil action4.4. The rent is determinate by court on the The rent is determinate by court on the

level of market rent.level of market rent.

Determination of market rent by Determination of market rent by the courtthe court

The map of market rentsThe map of market rentsExpert statementExpert statementSubmitting of minimal three valid Submitting of minimal three valid agreements from the same house by agreements from the same house by the ownerthe ownerSubmitting of pay bills which Submitting of pay bills which documents repairing of flat or housedocuments repairing of flat or house

Cost rentCost rentTenant (shareholder of coop.)Tenant (shareholder of coop.)

Pays the rentPays the rent AgreementAgreement

Cooperative (owner of flat)Cooperative (owner of flat)

Cost rentCost rent

Rent = Rent = mortage + Repairs + mortage + Repairs + Administration + Insurance + Taxes Administration + Insurance + Taxes + Rent of land + Last year loss from + Rent of land + Last year loss from housekeepinghousekeeping

Impact of cost rent in CZ Impact of cost rent in CZ housinghousing

Well maintained housing fond in Well maintained housing fond in comparison with administrative comparison with administrative regulated houses during the term of regulated houses during the term of rent regulationrent regulationRelationship of coop members to Relationship of coop members to their housetheir house

Market rentMarket rent

Rent = f (P, F, N, Sch,…..)Rent = f (P, F, N, Sch,…..)

•The rent is determinate by many The rent is determinate by many kinds of factors.kinds of factors.

The main factorsThe main factorsPlacePlaceNeighbourhoodNeighbourhoodInfrastructureInfrastructureCity transportCity transportServicesServicesEducationsEducationsHealth care servicesHealth care servicesPublic officesPublic officesLabour marketLabour marketPopulationPopulation

Flat Prices in CZ Indexed Flat Prices in CZ Indexed

Urban development in OstravaUrban development in Ostrava

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Avredge price of flat in Ostrava Avredge price of flat in Ostrava in USDin USD

Avredge rent in OstravaAvredge rent in Ostrava

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

The main chracteristics of the The main chracteristics of the situationsituation

The prices are affected by the financial criseThe prices are affected by the financial criseThe market system after 100 years is balancedThe market system after 100 years is balancedSupply exceeds demandSupply exceeds demandThere are no possibilites to reach oversized profitThere are no possibilites to reach oversized profitBalanced law protection of tenants and ownersBalanced law protection of tenants and ownersParticipation of private sector on social housing Participation of private sector on social housing (opportunity for enetrepreneures)(opportunity for enetrepreneures)High rate of flat reserves High rate of flat reserves

Future of housing marketFuture of housing marketThe rise of service prices conected with The rise of service prices conected with housing (gas, electricity, water….)housing (gas, electricity, water….)New construct technologyNew construct technologyGetho problems – concentration of poorsGetho problems – concentration of poorsVacant flatsVacant flatsPrivatisation of state housing stockPrivatisation of state housing stockChanges in quality structure of tenants Changes in quality structure of tenants (partly financial weak hoseholds) (partly financial weak hoseholds) Demography Demography