Investment properties in Czech: Market Analysis & Expert Opinions
Big house price changes persist in the Czech Republic
Czech house prices are rising rapidly, as demand tends to outstrip supply. The average price of apartments in the Czech Republic increased by 8.75 percent (6.21 percent inflation-adjusted) during the year to Q3 2018, according to the European Central Bank (ECB).
In the first half of 2018:
- The average price of new housing grew by 13.23 percent (10.72 percent inflation-adjusted) according to the Bank for International Settlements (BIS).
- The average price of existing residences increased by 6.73 percent (4.36 percent inflation-adjusted) from the previous year.
Fast growth was driven mainly by favorable credit conditions in the country, a growing economy, and increasing real wages.
This was backed by estimates from the firm Deloitte showing sales prices of apartments in the Czech Republic ‘s regional cities, including Prague, rise by 10.1 percent in Q3 2018 from the previous year to an average of CZK 56,800 (US$ 2,500) per square meter (sq. m.).
In Prague, the average price of flats rose by 6.5 percent in Q3 2018 to CZK76,500 (US$ 3,366) per square meter. Prague accounts for about two-thirds of the country’s total number of property sales.
Demand is still high. Approximately 2,817 apartments were sold in new buildings and completely restored sites in Prague in the first half of 2018, up from sales of just under 2,500 units in H2 2017, according to Jones Lang La Salle.
Demand has been driven primarily by migration within the country and high demand for prime property by foreigners; demand for investment properties is also expected to play a significant role, according to a study published by the International Monetary Fund ( IMF) in 2018.
Residential construction operations are increasing rapidly, but are still below peak levels.
Demand has continually outstripped supply, especially in Prague. Planning and zoning legislation contributes to constraints on the supply of housing that add to price pressures. Some progress has been made in streamlining procedures for building permits, but construction levels remain below pre-crisis levels. The housing market in the Czech Republic is expected to remain tight in the coming years, with house prices projected to continue to rise sharply.
Moderate yields in Prague
House and apartment prices in the Czech Republic have risen sharply since 2014, according to figures from the Czech National Bank – but these price rises have now ended. Wonderfully beautiful Prague is a very expensive city to buy property:
How much will you earn? It depends very much on the location of your apartment. Rental yields in Prague 1 are quite low, at about 3.2 percent in a 60 square meter apartment. You will gain 5.3 percent in Prague.
Conclusion: At the moment, Prague yields are moderate!
Round trip transaction costs in the Czech Republic are low to high.
Total transaction costs in the Czech Republic are moderate
Roundtrip costs in the Czech Republic are moderate at around 7.51 percent to 10.02 percent of the purchase price of the property. The customer pays about 2.5 percent to 5 percent of the transaction costs. The seller pays 4 percent of the property purchase fee.
Landlord and Tenant
Czech law is pro-landlord
Czech law is generous to tenants (though 90% of the population still lives in the old, regulated rental sector).
Rentals: Rentals must be mutually negotiated between owners and new occupants in empty properties, and the parties must mutually discuss the duration of the lease.
Tenant Security: At the end of the contract, the tenant must leave; no notice must be given and the tenant is not entitled to change housing. There is no maximum deposit.
Modest economic growth; record low unemployment
The Czech economy is expected to grow by 3% in 2018 and is expected to grow by 3% this year, according to the International Monetary Fund ( IMF).
In 2018, the government suddenly reported a budget surplus of CZK 2.9 billion (US$ 129 million), thanks to higher taxes and social security collections. The surplus amounted to about 0.1% of GDP last year.
Unemployment in the Czech Republic reached a record low of 2 percent in Q4 2018, down from 2.3 percent in the previous quarter and 2.4 percent in the previous year, according to CZSO.
Inflation rose to 2.5% in January 2019, up from 2% in November and December 2018, according to the CZSO. This rise was still within the CNB target range of between 1% and 3%. Inflation is expected to remain within the goal for this year.