The Unassuming Economist

“Real estate values have also been increasing quickly. House prices have escalated rapidly from a post-crisis trough in 2012, both in Prague and outside the capital region. The increases are in line with those in neighboring countries, and simple metrics—price to income and price to rent ratios—do not yet show current house price levels to be unusually high (Figure 7, charts 1–2). However, data gaps preclude a more conclusive analysis—in particular, an aggregate price index for the commercial real estate market is not publicly available”, says IMF’s new report on Czech Republic.

On housing supply the report says that: “House price increases are amplified by inelastic supply. Construction declined considerably after the global financial crisis, and has not recovered significantly, despite the increase in house prices. In addition, the processes for obtaining necessary permits are long, complex, and often inconsistent, limiting the ability of supply to respond quickly to demand.”