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

4.4 Speculation (investment) in housing

It is very difficult to estimate the amount of real estate speculation (on rising prices) or investments (purchases to lease) in Prague. Respondents in the Housing Construction 2007 survey and Real Estate Agency 2007 survey, conducted exclusively within this project among important actors in the real estate market in Prague, were asked to estimate in their opinion what the annual share of older and new flats sold annually that are bought solely for the purpose of renting them out to tenants. According to Housing Construction 2007 survey the average estimate share was 32% of older flats (according to Real Estate Agency 2007 survey it was 20% of older flats) and 25% of new flats (according to Real Estate Agency 2007 it was 26% of new flats). It should be mentioned that in the Housing Construction 2007 survey 53% of respondents did not give an answer for older flats and 18% did not give an answer for new flats (the estimate share of older flats will thus be affected by significant error).

The estimates of investors and representatives of real estate agencies pertaining to the sector of older flats could in reality be the closest, at 20-30% of older flats sold. But it is necessary to bear in mind that this is just a qualified estimate made by people active in this field. In the case of new flats, respondents’ estimates were around 23–35%. Developers’ estimates (23% of the share of new flats sold) can be considered the most relevant for new flats. It seems from the estimates given by the respondents involved daily in the real estate market that the share of real estate purchases in Prague for investments purposes is more than negligible.

The survey respondents were also asked whether they could estimate the size of the share of older and new flats sold annually that remain empty after they are bought – i.e. they are purchased as investments with the expectation of a future price appreciation. The average share indicated according to the results of the Housing Construction 2007 survey was 9% of old flats and 8% of new flats.

Respondents were also in the end asked whether they could estimate the share of old and new flats sold annually to foreigners, whether as housing or as an investment. Most of the real estate agents’ estimates were around 10–20%. The estimate for new flats was similar – on average only several percentage points higher. The Housing Construction 2007 survey revealed similar results: among older flats the average share of flats bought by foreigners was estimated by representatives of investors, developers, and building companies at 14% and among new flats analogically the estimated average share was 15%.