This article deals first with the relative affordability of owner-occupied housing in Prague compared to the situation in the Czech Republic in general. The relative position of Prague in this region is then assessed in a cross-national comparison and determined to be specific. The article's main objective is to uncover the main demand factors behind the high prices and the low affordability of owner-occupied housing in Prague. The authors focus on factors that derive from the specific economic position of Prague and the specific culturally-rooted preferences of Czech citizens for owner-occupied housing. Findings from numerous sociological studies and experiments have proved both of these factors to be very important, and their future development will thus largely be influenced by the affordability of housing in Prague.
This paper contributes to the evidence that household credit relative to disposable income is a useful factor to inform house prices. This finding is observable both from persistent direct link between the two variables as well as from the relationship of credit with a residual of house price valuation equation. The latter has capacity also in its simplest form to identify overvaluation or undervaluation of property prices and relate them to actual market corrections observable over the post-crisis period in individual countries.
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