FDI Positively Impacts Property in Czech Republic

According to the European Union’s official statistics office Eurostat, the Czech Republic has enjoyed significantly more foreign direct investment than any other new EU member state in the year to date.  The nation has seen foreign direct investment (FDI) increase from 5.2 billion euros in 2003 to 8.8 billion euros last year, and it is safe to say that this increase in FDI is positively impacting property in the Czech Republic currently.

More importantly, the increase in foreign direct investment in this central European destination is seen by many as being sustainable as the nature of investment is now developing and maturing which bodes well for the development of a strong and stable commercial and residential property market across the country for at least the medium term. 

So far the increase in FDI has resulted in the Czech Republic moving up to an impressive eighth position among all twenty five of the current European Union members in terms of the amount received in overseas financial commitment, and the investment climate is such that the nation could move even higher in the rankings in the coming years. 

Previously, overseas investment activity was relatively simple and made on the basis that the Czech Republic was strategically well located in Central Europe whilst offering a cheaper work force than either neighbouring Germany or Austria for example – these facts created a surge in the commercial property market around Prague in particular for simple warehousing and distribution space.

This investment activity was welcomed for many reasons.  For one thing it saw an opening up of the commercial property market in the Czech Republic for FDI, it also resulted in the creation of jobs, many of which paid more than locally financed and backed work opportunities.  More and better paying jobs for the local market resulted in quite a rapid increase in local affluence which, when combined with the fact that it became easier and cheaper to borrow money for the purchase of property in the Czech Republic, resulted in a strong residential real estate market fuelled by strong local demand.

Now that the Czech Republic has proved itself as a politically and economically stable nation to the broader international investment community and proven that exports from the Czech Republic are increasingly in demand from across Europe, so the amount and type of foreign direct investment being made into the nation has matured.

Investment which comes with higher added value offering professional, skilled and specialist employment opportunity to the highly intelligent local workforce is now making up a strong percentage of the foreign direct investment being received by the Czech Republic as confidence in the nation and its people has developed – this means that companies are prepared to invest not only in the nation but in its people and such an investment suggests a long term commitment to remain in the country.  Other international companies are witnessing this commitment and are basing decisions to also enter the Czech Republic on the back of others’ confidence in the country…which is why it is likely that FDI will continue to go up.

As the majority of property in the Czech Republic is bought or rented by the local market, overseas property investors are happy to watch the local market develop in terms of financial status as this pushes up both the intrinsic value of property assets held in the country but also the amount of rental income that can be generated from such an asset.

Foreign direct investment is therefore positively impacting the property, the people and the nation and is a key indicator to the medium to long term outlook for the Czech Republic’s property market.

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