Most Prague districts agreed to an increase the real estate tax coefficient. Some 53 out of a total of 57 districts were in favor of changing the method of determining the amount of tax, according to Deputy Mayor Pavel Vyhnánek (Praha sobě). The four districts not planning an increase were not identified
The city is now preparing a decree allowing the amount of the coefficient for calculating the tax to be decided by individual town halls. Real estate tax is the only tax the city can influence.
“Real estate tax has not changed in Prague for many years. The approval of the increase was carried across the political spectrum,” Vyhnánek said. “The city districts have been calling for the real estate tax to increase. We decided to meet with them.” Of the 53 districts planning an increase, 33 intend to set the coefficient higher than the city’s draft decree, and 20 town halls will be satisfied with the proposed height.
In Prague, the local coefficient is now set at the national lowest possible level of one.
Prague is proposing an increase to level two on a five-point scale. According to the draft decree, the districts would set the size of their coefficient.
The coefficient is one of the factors used to set the final rate of residential property tax. Real estate tax consists of a land tax and a tax on buildings and units. According to the draft decree, the commercial coefficient, which affects the amount of tax on commercial real estate, will remain at 1.5. The proposed introduction of a local coefficient means this tax will effectively rise as well.
Housing prices in Prague have been rising sharply, even without property tax increases. They are the most expensive in the Czech Republic, and, relative to the average net wage, among the most expensive in Europe.
Since mid-2015, new apartment prices have risen by about 90 percent, creating an unsustainable situation where housing is inaccessible to most Prague citizens. A new 70-square-meter Prague apartment would cost the buyer their entire annual gross wage for 14.6 years, according to the Housing Availability Index published by developer Central Group in June. Currently, the price of a new flat in Prague is more than CZK 106,000 per sqm.