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

5. Supply-side factors

5.1 Introduction

Another factor behind the high value of the P/I indicator could simply be the physical unavailability of flats, the often-mentioned ‘housing shortage’, usually estimated in figure using indicators of the number of flats per 1000 inhabitants or the number of flats per 100 households. Our analyses showed that none of the indicators – the number of existing flats in relation to the number of people in the population or the number of households, or the amount of residential space on average per resident – suggests that there is a physical shortage of flats in Prague. On the contrary, in the majority of housing availability indicators Prague is either among the regions with the most or at least above-average flat availability.

Prague has the largest number of flats per 1000 inhabitants and “only” average (in comparison to other Czech regions) number of flats per 100 households, but also the highest value of P/I ratio. The values of two of the three indicators identify Prague as an extreme case in the Czech Republic. The combination of the greatest physical availability of flats (based on the number of flats per 1000 inhabitants) and the lowest affordability of flats (based on the P/I ratio) is counterintuitive. The indicators of housing availability and housing affordability do not correlate in the Czech Republic probably because the commonly used indicators of the housing availability in reality do not measure the availability of housing very well. The reason for this appears to be the ‘permanent residence’ phenomenon, i.e. the address people register as their official permanent residence with the authorities in the Czech Republic, but which in an increasing number of cases is not actually where they live. Another reason could be the specific position of Prague as an attractive international tourist location, as the city with the largest number of universities in the country, and as the place where most major companies have a head office. Many flats are temporarily inhabited by students, many others, in attractive parts of the city, are rented in the short term as tourist accommodation, and given that the city is the base for so many companies, many flats are probably also used to accommodate company employees from outside the city or from abroad.