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...
Did you know that you can break your mortgage fixation, sell your property, and refinance anytime, even if you fixed with the bank for three, five, or eight years or so? The bank must allow you to close the mortgage prematurely… for a cost. And there is a big change from January. Let us start from the beginning. What is fixation: When you take your mortgage for let’s say 20 or 30 years, the interest rate will not stay the same for the whole time. When taking out the mortgage, you choose a “fixation period”, which means that for the next X amount of years, the rate will be fixed at for example 5.39%, which is the best rate we can get today (end of November 2023). With this in mind, you might be tempted to go for a shorter fixation and hope the rates go down. But, if you can refinance anytime anyway, why not choose 10 years and simply break the fixation whenever it suits you? How much did it to break fixation? Depending on when you signed your mortgage or renewed your fixation period (which, for the sake of working out these costs, is considered a reset...
KKCG Real Estate Group shared the successful sales results of the second phase of family houses and villas at the POMEZÍ residence in Košíře, Prague. KKCG REG started the construction in November 2018 at the foothills of Stolové Hory Vidoule in Košíře. The first phase, completed in 2021, included 90 premium apartments across four residential buildings. The ongoing second phase, which started in May 2019, comprises 38 family houses, four apartment buildings with 148 units, and five standalone villas. The 3.7-hectare sloping plot was creatively designed with a mix of apartment buildings, family houses, and villas to ensure privacy and scenic views for all residents. Otto Koval, Executive Director of KKCG Development, attributed the project’s success to its premium location next to the Košíře-Motol nature park, unique urban design, and personalized client approach. The entire Top’rezidence POMEZÍ, covering 3.7 hectares, is set to be completed in the summer of 2024, offering amenities such as relaxation areas, retention ponds, community spaces, and sports facilities. Currently available for sale are the last three row houses (4+kk) and one standalone villa with a 400m2 floor area. The successful approval of 60 apartments and the initial groups of family houses from the second...
Buying a property in another country is simply not as easy as ordering food delivery through a phone app. That is a fact. The Czech Republic might not be the simplest when it comes to bureaucracy, language, and banking so today I want to share the three biggest mistakes I see expats (but also Czechs) make when buying a property, so you do not have to go through the same again! Oh – and one really, really bad idea to end with, something you should NEVER EVER do… Mistake Number 1: Not using a lawyer when buying a property. This is something I cannot get my head around and usually Czechs are worse at this than expats. The story goes like: “No, why should I need the lawyer, I think the contract looks OK. I asked my friend who works in…” I am not speaking just of purchase contracts either, but even the first reservation contract, which you sign when you want to take the property off the market. Recently I heard a story “I need a lawyer, I signed a contract and now there is a problem since the seller is doing XYZ”. Better late than never, however, if...
With Prague’s population expected to grow fundamentally over the next 25 years, the municipality continues to cooperate with residential developers in order to prepare for the new wave of residents looking to relocate to Czechia’s thriving capital city. For developers such as Horizon Holding it is essential to plan out neighborhoods and develop new ways for Prague to improve in terms of living quality that will attract new residents. Active in the Czech market for over twenty years, Horizon has completed several residential projects in Prague and its suburbs, including quarters such as Modřany, Karlín, Čimice, and others. As of today, the developer completed apartments for over 1,500 families and is about to start new projects that will bring thousands of new apartments to the market. “We are not necessarily attached to one location or one quarter, but we choose what we believe to be an interesting project meeting our standards, preferably of bigger scale with over 100 apartments,” said Yishay Furman, CEO of Horizon Holding. “We prefer projects that can be phased, to start with 100 units, then we gradually expand further the neighbourhood with retail units, build parks that include playgrounds, resting areas and also art, as you...
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