Speaking of the Czech Republic, it is simply impossible not to mention Prague - one of the most interesting cities not only in Europe but also in the world. The central part of this amazing city is a real open-air museum of the Middle Ages. After all, in the Old Town, narrow ancient streets are still preserved, where two mounted knights could not pass each other. Charming as well are the small Czech towns, drowning in flowers, with neat houses and a mandatory town hall on the paved city square.
For those who want to quickly overcome the language barrier, it is worth considering studying the Czech language. However, 'Germanists' will also be comfortable in the Czech Republic. Older Czechs speak German quite well - after all, once the Czech Republic was Bohemia and part of Austria-Hungary, in Cisleithania (the German part of the Habsburg Empire). Accordingly, industry in the Czech Republic is more developed than in neighboring Slovakia (until 1993 there was a single state of Czechoslovakia), and salaries are higher. The average salary in Prague is currently about €1.200 ($1.800), and in Bratislava - €700 ($.1050).
What can be bought
The real estate market of the Czech Republic is very diverse. As reported by Mikhail Butenko, head of the foreign real estate department of the Bonus Real Estate Center, small apartments 2+kk are actively sold - two rooms and a kitchenette (when all necessary kitchen equipment is located along the wall of the living room). The feature of such housing is acceptable area at an affordable cost and the possibility of subsequent rental. Prices start from €1.800 per sq. m. ($2.700).
Nina Botnaru, a representative of the Romanian company 'Orange Construction', actively working in the Czech real estate market, noted that the most prestigious districts of the capital are Prague-1, Prague-2, and Prague-6.
Prices in the capital and the provinces differ markedly. A one-room apartment in Prague can cost $110-135 thousand, and in the provinces - $30 thousand. Accordingly, a two-room apartment - $130-170 in the capital and $30-40 thousand outside it. A three-room apartment - from $140-150 thousand in Prague, and in the provinces - from $40 to 80 thousand.
In the Czech Republic, cottage construction and other low-rise buildings are very developed. In Prague, you can choose a townhouse, cottage, or villa for every taste and budget and become the owner of your own home in the capital or 5-10 kilometers from it with excellent transport accessibility. Moreover, some clients purchase several dozen houses. According to Nina Botnaru, a five-room cottage on the outskirts of the Czech capital 15 km from the center can be bought from $200 thousand. For the same money, it is quite realistic to build a new house with an area of 100-150 sq. m, which will be delivered 'turnkey' in 3-5 months.
The cheapest rural house with a standard (6 соток) plot of land can be found in the Czech Republic for $30-55 thousand. Within a radius of 30-50 km from Prague, its cost will increase to $40-80 thousand. But what is valued here is not so much the house itself as the land on which it is located. Most often, the old house is demolished and a new one is built in its place. The real costs of building a two-story mansion with a total area of about 200 sq. m with the feasible participation of the developer himself can be about $20 thousand. The market value of such a house is about $60 thousand. If necessary, it can be easily sold. Prices for land plots for residential development vary from $2.000 per сотку in the provinces to $11.000 in Prague.
One of the main advantages of buying real estate in the Czech Republic is the absence of a tax on new real estate. When selling housing, a 5 percent tax is paid, but it is levied exclusively on the seller.
Western investors set the tone
Investor preferences are determined primarily by the goals with which housing is purchased. 'For example, if resort cities such as Liberec, Františkovy Lázně, Mariánské Lázně, Teplice, etc. are a priority, then you have to choose from apartments located primarily in old houses in the city center, since currently there are very few new buildings in the central areas of these cities,' says Mikhail Butenko. 'In Prague, there are also few interesting projects in the city center and they are sold very quickly.'
As Grażyna Miszczak, head of the analytical department of the agency 'Kotovsky-Mlyn', said, Bavarian Germans are active in the Prague real estate market. Munich, the capital of Bavaria, is rightfully considered the most expensive city in the 'Bundesrepublik'. Not only real estate is expensive there, but also things and food. Therefore, as soon as the 'Iron Curtain' fell, Munich residents started coming to Prague for shopping, and then began to look at real estate. And they found it very attractive.
In the next five years, Czech square meters will grow
According to Mikhail Butenko, among the key factors determining the investment attractiveness of Czech real estate, it is worth noting membership in the European Union and the Schengen area, high economic growth rates, low inflation, availability of mortgages, high quality of construction. Thanks to these indicators, the Czech Republic is among the top ten most investment-attractive countries in the world in the Forbes magazine ranking. Finally, the stability of the region is of great importance.
As Nina Botnaru clarifies, in Prague not only are housing prices rising, but a luxury real estate market is also forming. The global credit crisis led to a decrease in the number of buyers of economy-class housing and an increase in interest in luxury real estate. Housing prices in Prague have risen by 9.5% over the past year, while in the luxury segment - by as much as 11%.
Ours learn on the go
Citizens of the former Soviet Union are also actively joining the investment process. At the Bonus real estate center, they note that more and more clients of this company are turning from ordinary buyers into investors: they try to enter at an early stage of the project, ensuring income from the capitalization of the project during construction, take into account the strengthening of the local currency against the euro and dollar, transfer real estate to management, receiving income from renting it out and subsequently reselling it, locking in profits.
According to Nina Botnaru's observations, many compatriots prefer to buy land in the Czech Republic and build houses themselves. With constant price increases, this turns out to be much more economical than buying a ready-made house, the cost of which includes a 25-30 percent profit for the developer. High-end real estate is bought both as housing and as a profitable investment.
“How profitable it is to invest in real estate depends on the type of real estate and the buyer's investment strategy,” says Mikhail Butenko. “On average, we are able to provide clients with a return on their investments of 15-20% per year.”
What about the crisis?
Meanwhile, European markets, especially Western European countries, are experiencing stagnation and even falling prices. How will this affect Czech real estate?
“You can make money on any market, it's just a matter of competence,” believes Mikhail Butenko. “Professionals will be able to provide solid income in any market. For example, the pace of sales of new buildings in the price segment up to €1,800 per sq m has recently declined. There are several reasons for this: seasonality (the pace of sales traditionally decreases in summer); an increase in mortgage rates; stricter bank requirements for lenders; a large supply in the market in this particular segment. But we are convinced that the trend will change and prices will start to rise again.”
The Czech economy continues to grow at a record pace, wages are rising, the purchasing power of the population is increasing, the Czech Central Bank has lowered base interest rates, which has already affected mortgage rates, which have also begun to decline. In addition, buyer activity increases in the fall, and most banks will enter the market with fall mortgage promotions.
“In a higher price segment (from €2,900 per sq m), apartments sell out very quickly,” the expert emphasizes. “There, the main factor is not the price but the location, and there are always few such projects. Therefore, they are always liquid, even if the overall market situation shows a trend towards falling prices.”
About Czech mortgages
Foreigners can only take out a mortgage through a legal entity. According to the Bonus real estate center, the additional costs associated with this do not exceed €2,000; moreover, having a company in the Czech Republic simplifies obtaining visas and is a plus when applying for a residence permit.
The interest rate on mortgage loans ranges from 4.8% to 6%, and the loan term is up to 30 years. Mikhail Butenko claims that there are practically no cases of mortgage loan rejection, despite the fact that our people still prefer cash to bank savings.
However, as Nina Botnaru warns, Czech banks have recently somewhat tightened requirements for legal entities. Previously, as a guarantee, it was enough to provide signed contracts confirming the availability of necessary profits in the future. But after the tightening of the fight against terrorism and money laundering, the National Bank of the Czech Republic (at the request of the EU leadership) obliged banks to check the financial history of companies receiving loans. One must be prepared for such a situation.
As it turned out, buying Czech real estate is pleasant and profitable. Pleasant because from here, in the geographical center of Europe, Germany, Austria, and France are within easy reach; because the ecology, climate, and health resorts are good. And profitable because property taxes are lower here, utility costs are small, and there is confidence that your property will significantly increase in value in a few years.
Sergei SHUMAKOV.
Metrinfo.Ru