Karlovy Vary is the most famous spa town in the Czech Republic
In Karlovy Vary, well known to Russians from visits by classics and aristocracy, the number of people from the former USSR has always been striking. It is believed that Russian money turned the city into the most famous Czech spa: in most cases, luxurious hotels, renovated historic mansions are the merit of Russian-speaking owners, and large residential complexes are the result of booming demand for them mainly from Russian investors.
However, now a significant part of the city's housing stock is put up for sale, and, as Radio Prague notes, demand for apartments is minimal. According to experts, the decline in Russian interest in Karlovy Vary is caused by several, mainly domestic Russian factors, including an actual ban on travel for employees of some security agencies, anti-Russian sanctions, and a decline in the population's well-being due to the ruble devaluation.
"According to our estimates, about 20 percent of apartments are for sale in Karlovy Vary, while in the most attractive spa zone, 70-80 percent of apartments are vacant," says Lenka Stranska, owner of the real estate agency Re/Max Air.
"Prices here are inflated, they do not correspond to the actual value of housing. The real estate market operates by distorted rules, so most properties sit idle. At the same time, apartments sold at a reasonable price quickly find a new owner," explains Tereza Lavickova, press secretary of Next Reality.
The exodus of Russian investors is the main reason for the crisis in the Karlovy Vary real estate market, analyst Ivan Zhikesh is sure. "Russians used to buy everything in the city at any price, thereby destroying the real estate market. Because of this, dozens of luxury apartments in the center of Karlovy Vary remain unoccupied. I think it will only get worse. For Russians, Karlovy Vary has lost its charm," the expert noted.
However, not only real estate market participants have suffered. Owners of shops, restaurants and hotels are suffering large losses. "I will not hide it, Russian clients during their stay in Karlovy Vary spent significantly more money than clients from Western countries," confirms Josef Dlohosh, manager of the Olympic Palace Karlovy Vary hotel.
The local airport also faced difficulties, whose services were used by over 100 thousand tourists in 2014. "Just a year later, we recorded a significant decrease in profit, as the tourist flow and accordingly revenue fell by about 50%; in 2016, unfortunately, nothing changed," Radek Zabransky, marketing director of Karlovy Vary airport, told Radio Prague.
In addition, negotiations on resuming flights of Aeroflot fell through, as the requirements of its subsidiary Aeroflot Pobeda turned out to be unacceptable for the airport. Thus, flights to Russia from Karlovy Vary are now only operated by ČSA.
The airport and the Karlovy Vary Region are currently negotiating the launch of new flights to Tel Aviv and Düsseldorf. Chinese companies are also showing interest in flights.
The city administration is closely monitoring the development of the situation. Mayor of Karlovy Vary Petr Kulhanek is optimistic. According to him, in the first half of the year, the city was visited by 10 thousand more Russians than in the same period of 2016. He also recalled the positive dynamics recorded by the Prague City Tourism (PCT) agency. PCT earlier reported that in the first quarter of 2017, Prague was visited by 92,395 Russian citizens, which is 52% more than in the first quarter of last year. And although more than 60% of Russians head to Prague, growth was recorded in all regions of the Czech Republic, the agency emphasized.
"But I cannot predict whether Russian investors will return specifically to Karlovy Vary. It will depend on how the international situation affecting the ruble exchange rate develops and what the situation inside Russia turns out to be. We, thank God, were not lazy and sought to focus on other markets in Europe, Israel, our domestic market. As a result, the decline in the number of Russian vacationers was largely compensated by an influx of tourists from Germany, Israel and the Czech Republic itself," stated Petr Kulhanek.
Experts, however, are more restrained in their assessments. They, in particular, point out that the Russian clientele in Karlovy Vary has changed. "Russian tourists have stopped making large purchases; they no longer have that kind of money," notes Vaclav Novak, an economist at the University of Economics in Prague.
Maria Litinetskaya, managing partner of Metrium Group, also speaks about the change in the profile of the Russian buyer of foreign real estate. "Representatives of the Russian middle class have practically left the market; if earlier they could afford to buy an apartment worth 100-150 thousand euros, now in ruble terms the price of such properties has doubled. The average purchase budget has increased about twofold and amounted to about 350-400 thousand euros. Only the wealthiest clients, ready to make expensive acquisitions, remain on the market," Litinetskaya noted in an interview with Kommersant.
Meanwhile, according to the internet project of the organization "Municipal Scanner" "Guide to Karlovy Vary," about 50% of real estate properties in the city still belong to people from the former USSR. According to one of the authors of the study, activist Mikhail Maglov, this is mainly the tourist center of the city, that is, the most expensive real estate.