Real Estate Market in the Czech Republic

Briefly about the main thing

The Czech Republic is traditionally loved by Russians for recreation and buying real estate. The proximity of culture and mentality, convenient transport accessibility, economic stability, a large selection of interesting residential properties and the absence of restrictions on the purchase of foreigners attract a large number of buyers of Czech apartments and houses.

The undisputed leader of demand is Prague. Excellent infrastructure, rich history, amazing architecture, international schools and universities, interesting cultural life deservedly make the Czech capital a favorite among other destinations of the country. Prague has good transport accessibility and a wide range of areas, from the central urban brick buildings of the Austro-Hungarian era to cozy houses in quiet, almost rural areas, however, conveniently located a maximum of 30 minutes to the center by public transport. The other two largest cities of the country are also popular, Brno and Pilsen, but demand there is lower, and prices are rising more slowly than in the capital.

People buy housing for themselves or for short-term rental in Karlovy Vary and Marianske Lazne. However, the situation in the local resort market is hardly lively, and housing is as liquid as in Prague. Those who seek to buy super-budget housing – turn their eyes to the north of the Czech Republic, where «a decent» apartment can be bought for €10,000. However, when deciding to buy a home in the Czech regions, it is worth bearing in mind the fact that when reselling objects here, they do not quickly find new buyers. An exception may be the city of Liberec, which is home to a popular Technical University.

Current situation

According to the National Bank of the Czech Republic (ČNB), the value of residential real estate in the Czech Republic is growing at the fastest pace in the European Union. Since 2010, average house prices in the Czech Republic have increased by 40%, and a significant increase (about 34%) has been observed over the past two years.

So, during the construction period, which for residential projects is about a year and a half, prices for the object under construction rise by about 15%. Therefore, by the time the house is put into operation, when selling an apartment, you can already earn good money. And by purchasing apartments for a mortgage and then renting them out, you can easily "cover" mortgage payments with rent. According to the latest statistics, the demand in Prague is twice as high as the supply, and developers literally do not have time to build new facilities.

The main feature of the Czech real estate market over the past year and a half, experts call a real boom in the purchase of apartments of small and medium size in Prague. Investors are actively acquiring such housing at the construction stage. Demand, as well as price growth, is fueled by historically low mortgage rates, which are currently at the level of 1.5-2% per annum. Despite the fact that the Czech Central Bank is currently taking measures to increase rates in order to prevent overheating of the market, these percentages are still among the lowest in Europe and in the world.

Regions to buy

The unequivocal leader of the Czech real estate market is Prague – and it is here that experts recommend buying housing. At the moment, there is stagnation in the resort housing market of the Czech Republic, and rent there has a clearly pronounced seasonality. If we talk about the Czech capital, then the demand here has a truly colossal scale, and completely diverse objects are easily rented out. Prague real estate has high liquidity, and even if a decision is made to sell, an investor can quickly and easily sell his property without loss. And even earning well, if this object has a number of mandatory qualities: convenient location, good footage and repair, view from the window, equipment, etc.

Families with children should choose areas with good infrastructure, close to nature, as well as international schools and kindergartens. For renting – areas with good transport accessibility, near the metro, it is best to rent small apartments. It is also important to consider the floor, whether there is an elevator in the house, etc.

The subtleties of buying real estate and taxation in the Czech Republic

First of all, it is worth noting that the purchase of real estate by foreign citizens is in no way limited by Czech law. But 10 years ago, an individual who does not have Czech citizenship did not have the right to purchase real estate.

The purchase procedure, that is, the process of registering a real estate object in the name of the new owner, corresponds to generally accepted practice. Deadlines to be aware of: the process of registering a new owner in the Real Estate Cadastre is three weeks from the date of submission of purchase and sale agreements. If we are talking about a mortgage, which is more likely to be available to persons with permanent residence in the Czech Republic, then the registration process may take several months, since first the bank must "register" its rights to the object. It is worth paying attention to the reservation of the object as a contribution is an amount of, as a rule, 5% of the cost, usually the booking time is two months, during which the buyer and seller negotiate the details of the transaction and confirm the versions of the contract of sale.

In November 2016, there were changes in the Czech real estate market: from now on, the buyer pays the tax on the purchase of secondary real estate. When purchasing an apartment or a house, it is he who is now obliged to pay an additional 4% of the cost, which can become a pretty decent amount at the initially high price of the object. In addition to the payment itself, the buyer is obliged to file a tax return with the details of the purchase within three months from the date of entry in the Real Estate Cadastre. Further, the property tax is paid once a year, but, as a rule, its amount is small and varies in the limit of CZK 500-1000, depending on the square footage of the object.

If the transaction is carried out through a real estate agency, the buyer will have to pay a commission of 3-4. But this rule does not apply to new buildings: by purchasing them, the potential owner of Czech housing avoids both paying the purchase tax and paying the commission. But even here it is worth remembering that the purchase of a new building is 15% VAT, which must be paid to the buyer.

When reselling an apartment, the period of residence of the owner in it is important - two years of actual residence (permanent residence) or five years of ownership. If the terms are shorter, the owner must pay 15% tax on the profit from the sale.

There is no practice of "additional payments" not included in the cost of real estate in the Czech Republic, the only thing that the buyer pays additionally is the above mentioned acquisition tax (4%).

Visa regime and entry for Russians

There are no problems with obtaining a Czech visa for Russians: it can be obtained on the basis of hotel reservations and tickets. At the consulate, documents are processed quickly, in general, it will take no more than seven days to obtain a visa. Experts recommend requesting a visa for five years, since in this case it is likely to be issued for a period of two to three years. Over the past five years, refusals for Russians were the lowest compared to other countries and amounted to about 1%.

Residence permit

There is no practice in the Czech Republic that allows a real estate owner to obtain a residence permit only on the basis of buying an apartment or a house. Currently, an amendment to the law on the stay of foreigners is being considered, simplifying the obtaining of business visas for investors, but it is still in the process of being developed.

In general, it has been difficult for foreigners to obtain a Czech residence permit since 2008. This is due to the country's policy to combat unemployment, which currently stands at only 3% in the Czech Republic. So today there are two ways to get a residence permit in the Czech Republic: to come to study or to get a job here on the basis of an employment contract. But with one condition: before hiring from abroad, the vacancy must be on the labor exchange for a certain period, and if it is not occupied by a citizen of the country, then the company has the right to hire foreigners.

Prices

Real estate in Prague is the most expensive in the Czech Republic. One-bedroom apartment is the best-selling property on the Prague real estate market for a long time and accounts for more than a third of all sales. 50% of the market further evenly divide one- and three-bedroom apartments among themselves. 15% are apartments with four or more rooms. The average size of the most popularThe apartment is 70 sq. m. At the moment there are no apartments on the market with a price of CZK 60,000 per "square". Apartments in the center are sold at a price of CZK 140,000 per sq. m, and even in the cheapest districts of Prague exceed CZK 60,000.

The average price is at the level of CZK 72,000 / 1 sq. m. Prices for small-sized apartments and apartments in good areas are growing the most.

Brno, the second largest city in the country, is also not far behind in terms of demand. The rest of the major cities are also much lower prices. The most inexpensive region is the northern Czech Republic, where you can buy an apartment from €8000. But there are large industrial zones here, there are many migrants and there is a shortage of high-paying jobs.

Rent

Due to the rising prices of apartments in Prague, the cost of renting them is also increasing. Prices for one-room apartments start from €450 per month, for two-room apartments from €600, for three-room apartments from €700 and above. The rental price will primarily depend on the location and condition of the apartments. So, a studio apartment in a new building near the metro may well be rented for €650 per month. But the price of such an apartment will be much higher. Elite housing will find its tenants for €5000-10 000. This is how much it may well cost to rent exclusive apartments in the historical center of Prague. The average annual yield from renting apartments in Prague is at the level of 5-6% per annum. If you use the services of real estate management companies – about 4%. In the Pilsen Region, the yield, taking into account the volume of initial investments, can be twice as high and reach 10-12% per annum. The buyer should keep in mind the general state of the regional market and enlist the help of a professional real estate agent to obtain a stable income.

An example of an investment in an apartment 2+kk, Prague district 6-Brzhevnov

• Investment contribution – ZK 3.8 million
• Average rent – ZK 13,000 (excluding utilities, may be higher with the risk of greater fluctuation of tenants), a total of ZK 156,000 per year.
• Income – 4.1% per annum

Example of investment in a new building (2+kk with parking space) in Pilsen:

• Investment contribution – ZK 2,339 million
• Average rent – CZK 8000 (without utility bills, may be higher with the risk of greater fluctuation of tenants), a total of CZK 96,000 per year.
• Income – 4.1% per annum

Five expert tips for anyone thinking about buying a home in the Czech Republic

1. If you want to invest securely in Czech real estate, buy an apartment in Prague. And it's better to do it now! Analysts predict a further 17% price increase only over the next 12 months, then the market may "calm down".

2. For security of making a transaction, contact the services of agencies. So the buyer will receive a thorough check of the apartment being purchased, checking for debts, encumbrances, etc. The entire service can be provided in Russian, and the potential owner will fully own the situation. When choosing a real estate agency, do not be lazy to search for information on the Internet. There are always reviews in the public domain, both positive and negative.

3. Before buying, make a thorough review of the property.

4. Consider the transport accessibility of housing. It should first of all be evaluated by people with children who cannot use a private car and are therefore dependent on public transport.

5. Evaluate the infrastructure of the area: the presence of hospitals, kindergartens, schools, cinemas and theaters, sports centers, etc. As well as the level of noise, air pollution, ecology in the area, etc.