How Is COVID-19 Changing Czech Real Estate Market?

Since the COVID-19 spread at the beginning of March, many changes occurred in our daily life. Suddenly, cities had been empty, stores, cafés, and restaurants closed, and all of us were locked down at home going out only for essential things, remembering an apocalyptic scenario usually seen in Hollywood movies. 

Over time, we reset our mindset, relearned to live, the situation got better and now we are trying to return to the old “normal life”. However, definitely with these times emerges new challenges, and a lot of transformations are occurring in different economic markets. Real estate is no exception, and therefore we will expose to you some changes in this market in the Czech Republic and its regulations due to the COVID-19 pandemic.

Real Estate Supply & Demand

At the moment, one of the main differences you can observe in the market compared to two months ago is the number of apartments to rent. Naturally, it is happening because once the borders had closed, tourism in the country stopped. As you know, in Prague a lot of apartments are rented through the Airbnb platform, and without tourism, the majority of the landlords are putting them on the market trying not to quit their incomes. Also, new expats are not moving to the country, and that means no new tenants looking for accommodation. 

Prices falling?

Following the basic economic law of supply and demand, the prices should have decreased since the outbreak beginning, but it is happening? Well, it is possible to observe the prices falling, logically depending on the zones, but in general, at the moment you can find a good accommodation at a very competitive price in relation to a few months ago. However, you have to pay special attention once some of them are for a short term contract because those owners want to go back to the Airbnb market after borders open again. 

On the other hand, if you intend to buy property, the prices are more or less the same. It didn’t go down as in the rental market, because not many people are offering apartments to sell and not many want to buy. In a few words, it means the market slowed down and weakened.

Changes in the law

Besides all of the mentioned above, to promote the property purchase and somehow to protect the tenants affected by the current situation, the Czech government approved some law changes.

The first change concerns the real estate acquisition tax: 

“For all properties acquired in the period from December 2019 to December 2021, the buyer will not pay the acquisition tax and at the same time, he will be allowed to claim deductions of interest on the housing loan from the tax base. Also, everyone whose tax has been due since 31 March 2020 will benefit retroactively from the bill.”

The second one, in turn, concerns the new law 209/2020 that has been approved by the parliament on 22 April. Briefly, that refers to four main points which are:

• The apartment owner can’t kick out a tenant if he doesn’t pay the rent between 12 March and 31 July, can only for other reasons or when the lease contract ends. However, the tenant will need documents from the labour office proving that he is not able to pay during this period.
• After 31 July, the tenant must pay these debts until the end of a so-called protective period which is from 27 April to 31 December. In case the tenant states that he won’t be able to pay this debt anyway, the landlord can end the lease contract at the moment.
• If an expat left for home before coronavirus and he can pay the rent, he must pay, since the borders are closed temporarily and now EU citizens can come back to the Czech Republic.
• In case the landlord would be in a personal financial crisis because of this situation (no income from the rent), and if both sides don’t come to an agreement, he can contact a court to solve that.

Prepared by the Foreigners relocation agency