“If there was an increase in real estate taxes and their connection to market values and at the same time the favorable taxation of short-term rentals was abolished, there would be an incentive to move unoccupied and short-term rental housing to the long-term rental market and to denser construction,” the European Commission said.
It annually compiles an assessment of their economies for the member states. In this year’s report on the Czech Republic, it states that real estate taxation is low here compared to other countries of the European Union. The Organization for Development and Cooperation in Europe (OECD) drew attention to this last year.
Despite the tax increase, which was enforced three years ago by the then government of Prime Minister Petr Fiala (ODS), the owners of apartments, houses and plots of land will pay a total of approximately 24 billion crowns, i.e. about 0.4 percent of GDP. The European average is 1.8 percent. In the Czech Republic, however, labor taxation is higher. On the contrary, this is more pronounced than in other European countries.
However, according to Petr Dufek, Chief Economist of Banka Creditas, the increase in real estate tax will not solve the problem of housing affordability. He mentions that it is not clear how many empty apartments there really are in the Czech Republic. And therefore not even how many could get back on the market.
“In addition, the increase would have to be really significant, which could, on the contrary, lead to an increase in rent,” stated Dufek for Fairpress.
Limit mortgage support and build
In addition to adjusting the real estate tax, the European Commission recommends that the support that the state provides to people with mortgages be re-evaluated. They can now deduct interest paid in the amount of up to 150,000 crowns per year from their tax base.
The Commission believes that if the Czech Republic were to limit this relief, it could cool the demand for real estate.
The Union therefore recommends to the Czech Republic the opposite of what the government of Andrej Babiš (ANO) is about to do. Finance Minister Alena Schillerová (ANO) told Hospodářské noviny last week that she could increase this support for young people under the age of 36.
Schillerová promises that mortgages will not be such a financial burden for young people. However, the experts contacted by Novinka do not agree with this. On the contrary, according to them, it can increase the demand for the purchase of apartments and thus their prices.
“Young people get a few thousand extra, but they pay hundreds of thousands more for an apartment,” said Tom Kadeřábek from the consulting company Swiss Life Select.
Dufek reminds that the main problem that worsens the inaccessibility of housing is poor construction in the long term. The mentioned report of the European Commission also recommends its flexibility. She states that it is necessary to shorten the time for the creation of spatial plans and the issuing of building permits.
The government wants to ensure this by changing the construction law, which provides, among other things, for the transfer of construction authorities to the state. On the contrary, municipalities would gain greater powers in the creation of spatial plans.
According to the European Commission, a step towards strengthening the availability of housing would be greater involvement of the public and non-profit sector in construction. This is what the municipalities are trying to do now.
