Housing Standards 2007/2008:
The Factors behind the High Prices of Owner-Occupied Housing in Prague

4.5 Foreigners in Prague and in regions outside Prague

Another factor that could influence the value of the P/I ratio in Prague could be the ‘large’ disposable incomes of foreigners living in Prague, who on the one hand add to the demand in the housing market and owing to their higher incomes cause prices to rise disproportionately, and on the other hand are not included in the household income statistics obtained in the Family Budget Survey conducted by the Czech Statistical Office and therefore are not included in the calculation of the P/I ratio. In this case it is not about the share of flats sold in Prague to foreigners (this share was estimated above and is not insignificant) but about the level of income of the foreigners who buy flats in Prague. Unfortunately, it was not possible to determine the incomes of those foreigners who already bought a flat in Prague, and therefore it was necessary to base the analysis generally on the incomes of foreigners working or permanently residing in Prague.

To sum up the results of this part of the analysis, there are significantly more foreigners in Prague than in the regions outside Prague, but a large number of them works in the lowest occupational categories and consequently the average wage of foreigners in Prague may be lower than the average wage of Czech citizens in Prague. However, there is also a relatively larger proportion of foreigners from wealthy countries working in high-ranking posts in Prague than in the regions outside Prague. Their estimated wages are roughly twice the average Czech wage. This wage difference of course corresponds to their probably occupational categories (according to the Czech Statistical Office, foreigners from advanced EU or OECD countries mainly work in the higher occupational categories of the ISCO - international classification of occupations) and corresponds to the difference between the average wage and the wage of Czech employees in the highest ISCO category in the business sphere. The effect of the incomes of foreigners could be stronger in just some segments of the housing market; wealthier foreigners in well-paid jobs are probably concentrated in the ‘high-end’ sector of residential housing. The effect of the demand from foreigners on residential real-estate prices in Prague may be stronger after the middle of 2006, when there was a significant increase in the immigration of foreigners. However, until the middle of 2006, when the P/I ratio in Prague significantly exceeded the value of the indicator in other regions, this effect was weaker compared to the others listed above.