Prague districts to sell some 10,000 flats to residents in 2012

Praguers living in city-owned apartments may be able to buy them for as little as Kč 700,000 — well below market rates

Society|Real Estate
Tom Jones | 22.02.2012
Prague districts will ask more for ‘brick hosues’, as opposed to prefabricated ‘panel’ houses that account for the majority of residences so far sold by Prague administrations

District administrations in Prague reportedly plan a home privatization bonanza in 2012, with up to three times as many city-owned apartments set to be sold to their residents as there were in 2011. According to estimates, the sales should raise a total of between Kč 8 billion and Kč 10 billion.

The Czech capital has nevertheless been slower than other major towns to off-load its residential properties. By comparison, the municipal administration of Plzeň, the largest town in West Bohemia, has already completed its residential privatization program having sold off some 18,000 apartments, and retaining 3,500 for social housing.

The industrial town of Ostrava in northeast Moravia is in a similar position where over 43,000 apartments previously reserved for miners and their families are now privately owned. However, the administration sold almost all of those apartments en-masse to the now billionaire coal-mining tycoon Zdeněk Bakala, and many residents of these properties are demanding they be given the chance to buy their homes. According to the daily Lidové noviny (LN), for the time being at least Bakala doesn’t want to sell.

In the capital, the administration of Prague 8 has led the way in privatizing communally-owned apartments. The district has already sold off almost 5,000 apartments in the areas of Bohnice, Kobylisy and Ďabelice (for a total of around Kč 2.4 billion) and now plans to off-load almost 2,000 homes in Karlín and Libeň from which it expects to raise a further Kč 2 billion.

“Karlín residents are now bombarding us with enquiries about when they, like the residents of Bohnice, will have the opportunity to buy their apartments. Now we will meet their demand,” Prague 8 Mayor Jiří Janků (Civic Democrats, ODS) told Lidové noviny.

Typically the municipally-owned apartments are not sold directly to residents, but instead whole apartment blocks are sold to collectives of residents. In order to qualify for privatization, at least 50 percent of residents in an apartment block must agree and form an ownership collective. Despite the more complex administrative and legal procedures compared to standard private ownership, the collective ownership model is popular nevertheless.

“The lowest percentage of those interested in buying apartments was 79 percent in one building. Usually, though, around 90 percent of residents want to buy,” deputy Prague 8 mayor Ondřej Gros, who is overseeing the privatizations in Prague, 8 told Lidové noviny.

Prague 8 plans to sell apartments in Karlín for between Kč 15,000 and 20,000 per square meter, between three or four times cheaper than the rate for new apartments in the area, according to the daily.

Other large sell-offs are planned by Prague 11, which counts on selling 3,430 apartments for between Kč 8,000 and Kč 10,000; this year Prague 9 plans to sell 315 apartments for 13,000 per square meter; and Prague City Hall, the capital’s central administration wants to sell-off some 4,000 apartments, but has yet to compile a list of which properties and set prices. 

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Good for residents - unfair for other owners and the public

I think this is great news for the residents who have been living in the properties and a great way for the city to balance budgets but at the same time accomplished in an unfair way. 

 

Since these properties are effectively publically owned why shouldn't they be auctioned to the highest bidder? It seems that this would be more in the interests of the public. 

 

This sale to tenants will hurt demand on the resale market. 

 

Nathan

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