Positive Czech Republic Property News

It’s been a week for positive Czech Republic property news relating to the residential and retail sectors of the nation’s real estate economy - which just goes to prove that confidence is still riding especially high in this part of Central Europe with the majority of encouraging focus still centered on Prague as a top investment destination.

Construction is booming in the Czech Republic, housing is in demand and yet supply is slow to come to the market, mortgage applications from overseas buyers are up, the luxury end of the retail sector is in competition with itself and all in all there are many exciting opportunities still to be had in the Czech Republic.

In 2006 construction of apartment based residential real estate reached record heights that have not been witnessed since 1993 - in fact, apartment construction was up just shy of 8.5% compared to 2005 levels and the boom in activity was fuelled not only by demand and the fact that mortgage interest rates were favourable, but because there was strong speculation at the time that VAT was set to increase dramatically in 2008.

This speculation has proven accurate; in 2008 VAT is going to increase by a whopping 14% which is why there is a great scurrying of buying activity currently apparent across the Czech Republic.  However, despite the fact that construction levels increased in 2006 and are still especially strong in 2007, the amount of stock that came to completion in 2006 dropped by over 8% compared to the previous year’s total and still property prices are being positively affected especially in Prague because demand just keeps outpacing supply.

There is some good news, a less harsh than expected start to the 2006/2007 winter season allowed construction activity to continue far later into the season than is normally possible which has put a number of projects ahead on predicted completion times.

In further positive news reports out this week, according to a leading lender in the Czech Republic demand for property is not just locally driven - in just five years the mortgage market in the nation has seen numbers of overseas applicants applying for local finance to buy property in the Czech Republic increase dramatically year on year and now the market has a strong base of international homeowners and investors supporting the ongoing development of the residential real estate sector as well. 

The recently released ‘Emerging Trends in Real Estate Europe 2007’ report from the Urban Land Institute and PricewaterhouseCoopers highlights the fact that larger cities across the Czech Republic are ripe for residential real estate investment and that they offer the opportunity for investors to purchase well located, substandard stock for renovation resulting in strong capital appreciation potential as well as the opportunity for excellent rental returns.

And finally, in terms of the retail sector of the Czech property economy, developers of luxury end outlet centers in Prague are going head to head to provide the most in demand and well located real estate space which will appeal to big brands seeking discount outlet space in a marketplace where demand for their stock is currently particularly intense.  Italian, Danish and local Czech construction and development firms are working on the provision of prime space and so far demand for their stock is intense.

Special Reports: Property News for Czech Republic

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