Czech Republic Property Outlook 2007

One of the main factors that will drive property prices and demand upwards in the Czech Republic in 2007 is the fact that VAT on all types of construction is due to rise by 14% on the 1st of January 2008 unless the European Commission accepts an application made by the Ministry of Finance to extend the period of time that the Czech Republic can apply a reduced VAT rate to construction. 

As 2007 could very well be the last year for buyers, investors, developers and constructors to effectively buy ahead of an enforced 14% hike in the cost of building properties, the Czech Republic property outlook for 2007 is very positive indeed.

Other than the impending and likely VAT hike a series of positive factors will ensure that residential properties enjoy a healthy period of growth in 2007 and afford an investor a decent rental rate returning investment commodity, and it is only commercial property as an industry sector that could suffer from surplus of supply.

Czech Republic Outlook 2007 – An Overview

Looking at the state of the economy in the Czech Republic and also the general public’s attitude to spending there are more positives than negatives affecting the overall nation.  For example, going in to 2007 consumer spending patterns in the Czech Republic are very strong and are proving that there is affordability in the market and this affordability is likely to be transferred to the real estate marketplace in increasing amounts throughout 2007. 

With the ease of availability of mortgages, loans and credit cards the Czech people are becoming a consumer nation hungry for Western style product - from designer clothes to attractive modern apartments – and an investor has a growing potential client base to focus on.  The majority of sustainable demand for properties for sale and rent in the Czech Republic comes from the local population therefore it is very significant that both affordability and demand are strong at the moment.  This is a good time for well located and managed investment purchases of property to be made in the main towns and cities across the nation.

Ongoing, the economic factors supporting the growth of the Czech Republic, the ongoing affluence of the people and the stability of the nation’s economy include the fact that inflation is under control and relatively restrained, interest rates are low, exports to the EU are increasing and there has been good structural reform in the financial services industry meaning that it is one very important sector of the economy unlikely to suffer any knocks and shakes in the near term.

Czech Republic Residential Property Outlook 2007

Apartments in Prague are the most in demand and expensive property commodity in the Czech Republic…in 2006 the average price of an apartment in the most sought after areas increased by 30% with gains of between 10 and 20% easily achieved across the city.  Because demand for well located apartments in Prague is not abating and actually annually exceeds the number of units coming to the market, despite the fact that asking prices are high and price gains have been strong in 2006, 2007 will be another excellent year for the apartment rental and resale market in Prague.

Elsewhere in the Czech Republic, with house prices just 38% of the EU-15 median price there is a strong chance of growth fuelled again by a demand versus supply situation where not enough stock is available to the consumer who has more ready cash available in terms of income and loan values to fund a purchase.  Investors should look at areas already affluent where there is the chance to buy and renovate or modernise property and locations set to benefit from infrastructure improvements or developments or the establishment of new employment opportunity.

Czech Republic Commercial Property Outlook 2007

In recent times the commercial property market in the Czech Republic has been an excellent place to invest.  Demand was massive for everything from retail space to logistics and warehousing…but because demand was soaring too many constructors jumped in on the act and in 2007 hundreds of thousands of square feet of space are due to be completed at a time when demand has eased and vacancy rates are rising.

Having said that, commercial property is a good, slow burning alternative investment commodity in a nation like the Czech Republic where demand will always exist and where the strategic importance of the nation means that demand could increase at any time in the future.  2007 is unlikely to be a year of fast profitability in this sector but it could be a year towards the end of which an investor could pick up some bargain properties for income generation purposes and long term capital growth.

In conclusion - all in all the Czech Republic remains an attractive location for property investors to explore…the nation is economically and politically stable, it attracts high levels of investment particularly from companies establishing direct operations in the nation and ongoing the Czech people will become able to afford and demand more in terms of residential real estate.

Special Reports: Property News for Czech Republic

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