Prague property market
Residential Rental Market
Rent in Prague is comparable to that in other cosmopolitan cities around the world. Until the late nineties, the supply of quality apartments and family houses was extremely limited, resulting in very high rent being paid chiefly by expatriate employees of foreign corporations. As the number of well-refurbished properties has increased over the years, rental levels have peaked and leveled out. However, demand has remained strong for apartments in the more popular areas of the central city and good family houses in the vicinity of the international schools remain in short supply.
The Investment Market
The purchase of individual units or entire residential buildings for investment or development purposes is an attractive proposition due to the prospect of good capital appreciation upon the country's accession to the Euro zone. A growing proportion of property purchasers are foreigners who have been in the Czech Republic for some time. The market has also seen increasing activity from international investors that have been attracted by rapid appreciation compared to many other European countries. The prices in all areas of Prague, especially in central locations, have been increasing continuously since the early 1990‘s. On average you can expect 8-10% annual growth. Selected centrally located properties can reach 20% annual growth. In general, properties close to the center have higher growth potential, and a higher rate of occupancy than do those at the outer areas of the city.
How can foreigners buy real estate in the Czech Republic?
There are two categories of foreigners – EU citizens and non–EU citizens.
EU citizens may purchase and own property in the Czech Republic as individuals if they obtain EU citizen residence permits valid for 5 years. Obtaining the permit is easy. One merely files an application with the Czech foreign police. Recently, this policy was extended to include citizens of the United States of America.
Applications for residence permits may also be filed from abroad at Czech embassies or general consulates, but may take up to three months to process. If coming to Prague is not convenient for you, you may choose to designate a representative to file the application and arrange for the required documents.
A non-EU citizen must form a limited liability company called an s.r.o. The s.r.o. then buys and holds the property. The non-EU citizen can be the 100% shareholder of the s.r.o company. This is safe, and simple with the assistance of a legal representative, who will help to assemble necessary documents and fulfil other requirements. The cost ranges between EUR 2000 and EUR 3000. The company must be initially capitalized with at least EUR 7500, in a Czech bank account.
We work with a law firm which can arrange all of the above at a reasonable cost.
What are the tax implications of acquiring real estate?
Real Estate Tax: All properties are subject to a nominal annual real estate tax depending on the position and size of the property. A typical two-bedroom apartment in the center, for example, would be taxed at about EUR 40 per year.
Transfer Tax: According to Czech tax law, the seller is liable for a property transfer tax of 3 % of either the assessed valuation or the sale price, whichever is higher.
Income tax: A property owned by a company and generating an income is subject to taxation at the current rate of 21%. There are many tax-deductible items that can be used to reduce taxable income, including refurbishment costs, interest charges etc.
Individual Czech persons, EU citizens and foreigners with residence permits, are subject to a 15% income tax based on the amount of income earned in the Czech Republic.
How does the purchase process work?
Together with signing the purchase contract, the buyer will typically register the purchase amount in a notarial or escrow account to which the seller will have access only after the Purchaser is registered as the new owner. It is likely that documents will be in the Czech language and you will need a lawyer to represent your interests.
How much should I expect to pay per square meter?
The minimum price in Prague is currently around EUR 1500 /m2 for properties on the outskirts. For renovated, European standard apartments in renovated or new-built buildings, the average price in central Prague is EUR 3 500 - EUR 7 000/m2 and the most exceptional product has reached around EUR 10 000/m2.
Are mortgages available to foreigners?
Morgages are available to citizens of the EU as well as to non-EU citizens. To obtain a mortgage, the applicant will need to provide proof of sufficient personal income and valuation of the property. Probably the most convenient way to arrange a mortgage is through a mortgage broker. There are also several banks that have recently developed products for financing the purchase of residential real estate for foreigners. We can refer you to some of the best mortgage brokers in Prague.
Can I rent my property at western rates in Prague?
Yes, quality real estate rental rates in Prague are comparable to those in other cosmopolitan cities around the world. Continental Realty is ready to help you find a suitable tenant for your property.
If you would like to discuss these issues in detail or have any questions at all, please do not hesitate to contact us.
