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One cannot discuss the future of the Czech housing market without mentioning the effect of the Czech Republic’s entry into the EU on housing prices. The most commonly heard statement is that 'housing prices will jump from May 2004 when the Czech Republic officially join'.
Investment strategy
Recently, gross investment yields (defined as annual gross rental value / purchase price) on residential housing in general have been squeezed to a typical retail level of 8%. Yields in the city centre are even less and one cannot ignore the high vacancy rates of luxury flats. A year ago yields of 10-12% could be reasonably expected. Falling yields are the natural result of sale prices growing faster than rental rates. Theoretically they are indicative of a maturing and stabilized economy. The lowered rate of return is simply reflecting the lowered risk of investing into the Czech Republic. Still, knowledgeable investors recognize that the risk/return ratio of the Czech property market is far more attractive than that of Western Europe.
For those seeking to employ the leveraged 'buy-to-let' strategy of investing into rental properties, for a given investment of say GBP 100,000 it is better to own several smaller flats than a single large expensive one. We know of at least one developer in Prague that recently sold out all of its 50-75 sq. m 1 and 2 bedroom flats and subsequently decided to split up its remaining larger flats into smaller units.
For those intending to use bank loans to leverage their investments, it should be mentioned that interest only loans are currently not available in the Czech Republic. Interest on Czech Crown denominated loans is currently available at rates under 5% and financing is typically available on up to 75-80% of the underlying properties value.
A comprehensive list of properties is available on this site. We are happy to discuss any specific investment details with you at length. Contact Villarama on 01444 243777
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