Page 50 - CE Outlook Regions 2022

Czech government decided to waive VAT (21%) on energy for
November and December 2021, which may put Czechia and its new
government in 2022 on a collision course with the EC.

In mid-December 2021, the new Chamber of Deputies was supposed to
address the proposal of the former government of Andrej Babis to
amend the VAT Act, according to which the supply of electricity and gas
will be exempt from tax with the right to deduct the tax with effect from
January 1, 2022. However, MPs blocked the extraordinary meeting and
thus the amendment has not been discussed at all.

According to the analysts, the VAT waiver would not compensate for
high energy prices. Some users would be over-compensated, some
under-compensated, but in the long-term the measure would not help
low-income households or seniors, they say.

According to the Ministry of Industry and Trade, the price of
electricity is expected to rise by 30% to 50% in 2022, while the price
of gas should increase by 50% to 70%.

3.1.5 Construction

In 2021, real estate market prices have risen in all European
countries, with Czechia seeing the largest growth in housing prices.
According to the CNB estimate, the apartments in Czechia are
overvalued by about 25% – and investment apartments by more
than 30% – for a median-income household.

Growth in construction work prices in the country gathered pace
during the summer 2021, reaching almost 7% in September, with
growth in construction material and product input prices amounting
to 16.5%. These cost pressures, together with strong demand for
construction output, led to double-digit growth in the house price
index (almost 15% in 2Q21) which, combined with soaring inflation
and growing labour shortages, will keep core inflation high in 1H22.

KB forects stagnation or weak growth for the construction sector in
Czechia in 2021, with residential real estate prices growth at 8.5%.
The bank analysts do not expect a significant improvement in the
supply of materials until 2022, when EU funds and public investment
should play a significant role. They predict the construction industry
on average to expand by close to 9% in 2022–23.

Another significant impact on the Czech construction sector is
expected from the postponement of the effect of the new
construction act that was approved by the Chamber of Deputies in
summer 2021. The new coalition government already stated it would
postpone the effective date of new legislation by a year as it is
concerned about the “one central building authority” principle which

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