Czech families spend most on housing

Prague, Oct 22 (CTK) - The average Czech family now spends most on services including housing and related costs, which swallows a third of its monthly expenses, while in 1989 it spent around 18 percent of its monthly budget on services, according to data published by the Czech Statistical Office (CSU).

In the early 1990s families spent a major part of their monthly budget on industrial goods.

Analysts attribute the changes in spending to the transition from a centrally-planned economy to a market economy and to mushroom growth of global economy.

Twenty years ago families spent almost 40 percent of their income on industrial goods a month on average. Average net wage reached around Kc2,500 in 1989, now it is some Kc18,000.

A Skoda car sold for Kc84,600 in 1989, almost 34 monthly salaries. Last year's price of the Skoda car was Kc280,000 or 16 monthly wages, according to the statisticians.

The share of industrial goods in consumption has fallen to 30 percent, while the share of payments such as taxes and insurance as well as investment and loan installments has been rising.

Unlike Western Europeans, Czechs are conservative when it comes to investment and have their money deposited in banks and building societies.

Around 59 percent of families' financial investment is now in bank accounts, said AWD CR analyst Tomas Rampula.

Some 7.5 percent is deposited in pension funds, a tenth in insurance companies and 18 percent in securities including pension funds.

"The share of bank accounts will be falling and the importance of other financial instruments will be growing," said Rampula.

Households debt has grown markedly in the past few years.

According to the CSU, loans to households in 1997 accounted for 8.3 percent of all savings in banks, while in 2007 it was over 60 percent. Czech households have not yet fallen into debt trap but the number of families whose debts increased excessively has been growing.

The share of unpaid household loans in the overall volume of loans may increase to 6-7 percent in 2010, according to an estimate of the Czech National Bank (CNB):

Structure of net expenses of Czech households (in pct):
1989 1999 2008
food, drinks and public catering 33.9 27.0 23.3
industrial goods 39.7 33.2 30.9
services 17.8 29.0 33.2
payments and other expenses 8.6 10.8 12.6

Industrial goods include among others passenger cars and motorcycles, furniture, white goods, electrical appliances, TVs, toys, jewellery.

Services include among others services related to housing, transport services, health and social services, recreation.

Payments include among others taxes, insurance, loan installments, property purchases, lottery, veterinary services.

Source: CSU