Building savings are a very popular way of saving money for the future in the Czech republic since 1993. It is an established product that has taught many Czechs to save. Since then, there have been a lot of changes in building savings and more are on the way.
The Building Savings Act came into being in 1993 ´and the state then contributed 25 % of the annual deposit, a maximum of 4 500 CZK per year if the condition of saving for 5 years was met. In 2004, the annual state aid was reduced to 15 %, a maximum of 3 000 CZK, and the commitment was extended to 6 years. In 2011, the amount of state aid dropped to 10 %, a maximum of 2 000 CZK per year, and now this rate will be reduced by another 50 %, i.e. 1 000 CZK per year, which will apply to both existing and newly created contracts. This decision is the government’s compromise between keeping it and abolishing it completely.
The disadvantage of building saving is ineffective state aid – allowances come from taxpayers’ wallets, it is four to five billion CZK, which are not properly targeted. The total expected financial savings of 147,5 billion CZK should be noticeable in 2025.
Last year, building societies, of which there are 5 in the Czech republic, provided loans for total of 56,7 billion CZK, and the state paid out 4,33 billion CZK in aid.
Another disadvantage is that people use saved money for other purposes than for their own housing and there is no possibility to adequately keep an eye on this. Money should be properly used for example to help households cope with the energy demand of housing.
Building societies provide loans from money that people save with them. The cancellation or even significant reduction of state support may threaten the availability of loans provided to households.