Eastern property boom excludes the young

Article published on Sept. 25, 2006
From the magazine
Article published on Sept. 25, 2006
The wave of home acquisitions is pushing property prices up in Eastern Europe. Young people find it difficult to buy their first home

While conducting research for this article I have cast an eye back over my own “property career” and was astonished to discover that since leaving home I had lived in perhaps ten different places. Mostly I lived in “student pads” rented with a few friends. Each person occupied a room which he or she pays for on an individual basis. I did not stay in any of these flats more than a year. Today, the rent I pay drains three quarters of my salary. And the situation seems far from improving.

Help from daddy

The property market is similarly difficult in the rest of central and Eastern Europe. People would sooner rent than buy. Families will impoverish themselves to pay a house for their children. “Usually, parents buy a house as a future investment for their children,” explains Miglena from Bulgaria. “If they do not have enough means at their disposal, they will at the very least try to help them with some sort of financial aid. Rented accommodation is still popular: many people prefer to rent first before making a definite decision about an apartment. In average rental agreements last one year or less and it is increasingly difficult to settle somewhere on the long term.

Obtaining a loan is another common problem. In order to qualify for a bank advance, one must prove that one can pay 40% of the property. Prices are rising slowly but steadily. In the meanwhile, renting is often cheaper than buying, unless the buyer can pay half of the deposit up front, plus the ensuing monthly instalments.

Easy renting

Radical political change in the nineties has changed people’s attitudes to renting. “My parents have been tenants since they moved to Prague,” explains Vít, a citizen of the Czech Republic. “In the days of socialism, renting was the rule because around 70% of property in Prague belonged to the state. The problems first began during the Velvet Revolution in 1989, when property, seized by the communists in 1948, was returned to its owners. In the Czech Republic, the state determines property prices and the impact of the privatisation of housing on tenants is still unknown.” The Czechs, who are known for their light and breezy approach to life, are racking their brains to acquire their own homes.

A little house with a garden

In Hungary, the situation is somewhat different. Following political change in 1989, only 8% of property was rented. “Even if the state invested in building block houses, those with a private income could to construct their own home. Many detached houses with gardens were built,” says Judit, a student from Budapest. “During the wave of privatisation in 1989, people could purchase their rented accommodation. Hungarian culture focuses on the home, so much so that rented accommodation is unpopular. In contrast to Western Europe, Hungarians are less mobile and will move on average three or four times in their lives. And they usually change homes for social reasons - not financial reasons.” Owing to the vigorous rate of inflation over the past ten years, house prices in Hungary have trebled. “It is not simple to buy one’s own home, but it is still possible”, explains Judit. “The credit offer is very diverse and people who have financial difficulties can apply for state benefits. Thanks to this, young people with average incomes can purchase their own flats.”

In Poland, most young people rent rather than buy. With price inflation averaging at 10 to 15% per annum, youths are unable to purchase their own home. The Polish lifestyle has also dramatically changed in the last few years. According to data of the Ministry of Labour, around 600,000 Poles have left the country since it joined the EU and 37% are contemplating emigration. Unsurprisingly the Poles no longer want to bind themselves to property.

Copyright: Warsow (Natalia Sosin), Sofia (Jonathan Crellin), Prague (Ines Garmendia) and Budapest (Bálint Fejér).