Developers are set to complete thousands of flats in Prague this year, all at prices below the city’s average. According to Deloitte data, the average price per square meter in the fourth quarter of last year was CZK 152,600, but the completed flats are expected to be around ten percent cheaper. Central Group, the largest Czech residential developer, plans to finish 1,100 flats this year across projects in Prague 3, Prague 8, Prague 9, and Prague 10. An additional 1,500 apartments may be included in the sale, contingent on permitting processes. Skanska is in a similar position, completing 208 apartments this year in projects in Kbely and Modřany. Renata Vildomcová, a spokeswoman for the company, shared that over 73 percent of flats in the Albatros Kbely project have been sold, with an average price of CZK 123,000 per square meter. Developer Finep plans to complete 500 flats this year in fully sold-out projects with prices starting from CZK 82,000. Finep spokesman Tomáš Heček explained that the lower prices are due to selling most of the apartments before completion, reflecting a different economic situation. Looking ahead, Finep aims to start construction on 26 apartment buildings and 2,150 flats in various projects...
Owning property in Prague or the Czech Republic is the goal of many. To live in a city with such a rich history, beautiful architecture, work opportunities, and safe and clean (mostly) environment is surely very nice, but once you accomplish this dream, you might ask “What’s next”? Then you remember a holiday destination in the Canary Islands, or a house in Croatia, perhaps a flat in your home country, or maybe property in Spain or France? If you do not have the cash to pay for it from your own sources, the logical question is “Can the bank pay for it”? The answer is YES, but… Czech banks will not use properties abroad as mortgage security or collateral since they do not understand the local laws and can only help if you can provide sufficient collateral here. Let me work with the basic assumption, that you are financially stable with above-average income, you already bought a property in Prague a few years ago, and you know what you are doing. I will also not discuss the investment potential of these holiday homes, since that is another topic to be covered and probably not by me. Let me explore how...
Just as nature has its more favorable seasons, so the property market is similar. There are months when property sells well and months when the demand is very low. Therefore, it pays to plan ahead when thinking about going to market. A poorly chosen period means a slow sale at a lower price, whereas a well chosen period can result in a quick sale at a higher price. If you plan to sell real estate in the Czech Republic, you can schedule your sale based on the advice I’ll give you in this article. When is the best time to sell a property? Well, in the Czech Republic, the best time for selling homes is during the spring. The next good option is late summer. But remember, it’s not set in stone – other things matter too, like the type of property you are selling. If you’re looking to put your property on the market, March is a great month. That’s when a of potential buyers start actively looking. Usually, there are more people wanting to buy houses than there are houses available, creating a competitive atmosphere that might speed up the selling process and maybe even get you a...
This is a frequent question we get from clients who plan to invest in property in the Czech Republic, whether that’s an investment in apartments, apartment buildings, land or commercial real estate. The answer is very simple: if you plan to own the property for a substantial time, then in the vast majority of cases it is much better to buy the property in your name, primarily because of the income tax savings you’ll make should you decide to sell the property at some point in the future. Let’s take a look at a simple and also very common example. In 1992, two different entrepreneurs got the idea to buy an apartment building in Vinohrady in Prague. At the time, buildings such as these sold for about 1 million crowns. From today’s point of view, this is a ridiculously small amount of money, as the value today would be closer to 100 million crowns. However, at that time, buying real estate was not very common; rent controls were in place, buildings were in a very bad condition, etc. In this example, the first of our two entrepreneurs decided to buy a building for a company that he founded solely for...
About two years ago, buying a property was quite challenging. If you were looking to purchase a property then, you might remember there were often multiple interested parties and most properties were sold very fast, often resulting in bidding wars. I believe now we are seeing signs that we could be returning to that situation. The main reason for the drop in real estate transactions in 2022 and 2023 was the soaring interest rates. The Czech National Bank (CNB) increased the rates during 2021 and 2022 and banks followed with increasing mortgage rates, which is best shown in the graph below. As a direct result, there was a massive reduction in mortgage production. Some months saw a drop of 80% year-on-year! This in turn led to significantly fewer property purchases and many regions suffered a drop in prices. At some point, prices were down 20% in areas such as Cerny Most in Prague, or Ostrava. The reason for this was simple: People who needed mortgages to purchase a property were thinking about the costs of the monthly repayments. If the rates went up from 2% to 5.5%, for example, monthly repayments increased by roughly 50%. For the same mortgage,...
Earning income of a rental property is a popular form of passive income. If you, as an individual, are involved in long-term property rentals, taxation can be quite straightforward. In the right circumstances, you might not even need to pay tax on this income. However, income from short-term accommodation rentals is always considered a business activity, subject to stricter regulations, and often incurring higher taxes than income from property rentals. How to Determine if Your Rental Activity is a Business? The Income Tax Act defines so-called rental income and applies taxation when you, as an individual, engage in the long-term rental of your own property. For this income, you can either apply a flat 30% cost deduction, or actual costs. If your income exceeds 20,000 CZK per year, you must file a tax return. Any other form of property rental, such as providing accommodation services, is considered a business activity and requires a trade licence and compliance with other state-imposed conditions. This includes properties held as business assets, short-term rentals, or using platforms like AirBnB and Booking.com. These activities are identified by financial authorities as business operations in the accommodation services sector. Tax Returns: A Mandatory Requirement If you rent...
In this article, I‘ll introduce you to the topic of commissions so that you have all the information you need when dealing with a Czech real estate agency. I’ll guide you through what the normal amount of commission is in the Czech Republic, what it includes, and to who and when you need to pay it. The commission charged by Czech real estate agencies and agents varies, and it is usually influenced by factors such as the property’s value and the confidence of the agency or agent. Typically, there’s a standard commission that’s considered reasonable. Along with the basic percentage, it’s important to account for the statutory VAT at 21%, which is added to the commission. So, if the commission stands at 3% + VAT, the overall commission totals to 3.63%, with 0.63% being the VAT portion. Here’s what you can generally expect in terms of commission amounts: • Typically, for real estate valued between CZK 3,500,000 and CZK 15,000,000, the commission ranges from 3% + VAT to 5% + VAT. • Regarding properties priced between CZK 2,000,000 and CZK 3,500,000, the usual commission is from 4% + VAT to 5% + VAT. • For real estate valued between CZK...
Almost two years ago, the Czech National Bank (CNB) introduced three regulating parameters to limit how much the banks could lend customers (DSTI, DTI and LTV), which essentially considered personal debt and income against the mortgage value. This, along with increased mortgage rates, really slowed down the amount of mortgages taken out recently. At one point last year, the amount of new mortgages were down 80% year-on-year, more on this below! Now the CNB is removing the second regulation, DTI, or debt-to-income, on the banks meaning they could lend even more money to customers. In all, I think it’s fair to say the mortgage market has gone through some crazy development. To describe how low the mortgage market was a year ago, if we look at November 2022, 84% less mortgages were approved than November 2021. Minus 80% on production, that is quite something! Can you imagine your business revenues would go down this much? Banks were not having the “easy” times back then – but who would pity the banks, right? However, if we now compare November 2023 with November 2022, there is an increase of mortgages approved. More than +120% in fact! How is that possible? Source: www.gpf.cz/hypotecni-uvery-prosinec-2023...
To close up on the year, I would like to share a few exceptional expat mortgage case examples that might seem impossible to get approved, yet actually were. Less than 6 months in the Czech Republic and 100% financing! For the first story, we have to travel back in time to 2015 when a couple from another EU country decided to move to the Czech Republic in the middle of the year. Soon after, they heard that 100% financing was possible. They were looking to purchase a family house in Kralupy and boy did they get a good deal! For less than 3.5m CZK, with no down payment, and after just a few months in their new jobs in Prague, they got everything paid by the bank… Sigh… Good ol’ times. For those of you perhaps new to the mortgage market in the Czech Republic, though this couple was able to get 100% financing, it is not possible now. Currently, it’s capped at 90%. Business owner with minimum income, yet a 10m CZK mortgage was easy. Being a business owner is challenging and rewarding at the same time. The challenge comes from financing, as very often company owners pay themselves...
Understand the intricacies of property sales tax when selling real estate in the Czech Republic.
About 50% of property purchases are made with the help of a mortgage, despite relatively high-interest rates of around 5.5%. However, just because a bank has agreed to give you the mortgage, doesn’t mean it’s all smooth sailing from there. When you have financing from a bank, once the mortgage is approved, you should make sure you completely understand the mortgage contract so as to avoid any potential issues. Because I have been helping foreigners with their mortgages for the last 10 years, I would like to share a few tips on what to watch out for, BEFORE the mortgage is signed. Drawdown conditions Once the mortgage is approved, the bank will set a list of about 5-10 conditions you still need to meet after signing the mortgage and before it actually sends the money. These lists typically consist of: Deliver the bank-signed pledge contract (with verified signatures) for the property to the land registry Deliver the bank-signed purchase and escrow contracts Prove that you paid the down payments from your own finances, not from another loan Take out insurance for the property and show the confirmed payment If the seller has a mortgage on the property, get confirmation from...
This article covers the most effective ways to search for properties to buy in the Czech Republic on the Internet. Most readers will be familiar with the feeling of fatigue and frustration from long hours of often unsuccessful internet surfing. If you follow the procedures below, you may not experience this feeling quite so strongly (I won’t give you a guarantee that you won’t experience it at all, I would say that it just comes with the search). A prerequisite for success is that we have a realistic idea of what we are looking for and for how much. If you don’t, then even the process below won’t help you. In the Czech real estate market, you basically have only two ways of searching. The first one is picking up on all the tempting news. The second way is to work with the so-called lagers. In the first way, we have to be quick, and sometimes we have to take no prisoners; in theysecond way, we have to be patient and be good negotiators. Picking up the news Set up a watchdog on the portals below and keep an eye on 99% of new offers on the internet. The watchdog is...
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