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Real Estate in the Czech
Republic
By Elizabeth
Haas of the Ceres Group
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matter what part of the globe you call home, making the decision to invest
in property can be a challenging, albeit exciting process. Prague is all
the more enticing when a slice of history begins at only 50,000 GBP for
a romantic apartment in the centre of town. But for foreigners interested
in purchasing real estate outside of their own country, the road to home
or business ownership can be a bit more difficult to travel. In the Czech
Republic, and Prague specifically, a number of factors have combined to
lure non-natives to the Golden City. |
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The introduction
of the market economy is one such factor, creating substantial spikes in
incomes and higher demands for housing. Likewise, numerous foreign businesses
have been drawn to Prague (often referred to as “the jewel of Europe”)
due to its central location in eastern Europe and cheap labour costs. These
elements, coupled with its breathtaking scenery, have also peaked the film
industry's interests while making it a prime location for urban expatriates
who appreciate Prague's modernity, liberal atmosphere, and low cost of
living.
With such an
influx of foreigners arriving in Prague, the real estate market is booming
and the need for new or renovated housing is at an all time high. Many
Czechs are purchasing single-family homes in the suburbs or new condominiums
in the city while foreigners have become interested in villas and apartments
in affluent central and inner-city areas. The current supply of newly built
apartments does not meet the demand for them, as potential buyers seek
larger and better equipped dwellings. This makes Prague and the Czech Republic
very appealing options to the foreign investor.
Prague is UNESCO listed and has been
celebrated for centuries as the cultural hub of Central Europe, dazzling
great artists and statesmen alike for centuries with its freethinking and
liberal lifestyle and stunning architecture.
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After the Soviet invasion
of 1968 and the subsequent Communist crackdown, the country was closed
off to the world. However since the Velvet Revolution and the fall
of Communism in Central Europe, the Czech Republic has regained its place
as the center of Europe, conveniently near Berlin, Budapest and Vienna.
On 1 May 2004, it joined the European Union and it is now the choice destination
for tourists, filmmakers, celebrities and expatriates from around the world. |
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Property in Prague’s beautiful,
historic centre, comprising mostly suburban single-family housing, condominiums
and newly renovated villas and apartments, has become increasingly restricted
to higher income clientele; namely entrepreneurs, managers, successful
professionals and higher income families. The renovated apartments are
well equipped and stylish, set among Prague’s urban buzz, but also near
Prague’s numerous and idyllic public parks, perfect for jogging, strolling
or rollerblading. Hopping during the summer with lively beer gardens,
the parks are essential components of Prague’s summer atmosphere. With
the influx of western foreigners and wealthy Czechs, lower income city
residents migrate to cheaper areas outside the center.
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| The prices for property in Prague
can be divided into three principal sectors. The more affordable CZK 22,000/
m2 – CZK 41,000/m2 attracts the most investors and is well suited to the
buy-to-let investment model. The second sector, CZK 41,000/m2 - CZK
85,000/m2 is characterized by high quality amenities and construction and
the demand for this category of property is still significantly higher
than the supply. The third sector is comprised of property between
CZK 85,000m2 – CZK 200,000/m2, and competes with other European cities
for luxurious dwellings.
But while property in Prague is in
high demand among foreign businesses and individuals, only certain Czech
banks will provide mortgages for foreigners and even in successful cases,
the process is time-consuming and bureaucratic. In light of anticipated
vacancies, costs and taxes, banks also tend to be conservative about evaluating
future rental income levels. |
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Additionally, banks lend against their
own property valuations rather than against property market prices, and
bank valuations therefore tend to be lower than the actual price of the
property. It will be necessary to demonstrate additional income to obtain
a bigger mortgage and as such it is a good idea to speak to an independent
mortgage broker who can act as intermediary between the client and the
bank.
The rules for buying and selling
property are very complicated, especially for non-EU citizens. European
Union (EU) citizens get an upper hand because they are not required to
have a visa allowing them to stay in the Czech Republic longer than 90
days. To buy property, EU citizens need only an EU card, which they
will receive after explaining why they must remain in the Czech Republic.
Appropriate reasons for staying in the country include employment, studies,
management of a company or a sole trade license, which is taxed annually
and requires only proof of residency. Non-EU citizens, on the other hand,
must have a visa, remain in the Czech Republic for seven years or marry
a Czech citizen to obtain the green card allowing them to buy property.
Both non-EU and EU citizens may buy property through a limited liability
company (known as an s.r.o.), but only the EU citizen can control the company
without Czech participation. The non-EU citizen must recruit a Czech person,
EU citizen or person holding a long-term visa to be the company’s executive
director.
To buy a shelf-company
to facilitate buying, holding, renting or selling real estate, it is necessary
to provide all necessary documentation, a process which usually takes about
24 hours. The flat fee cost required should include registration of all
necessary institutions and changes, bureaucratic measures and any
other cost related to the purchase. The fee should include a registered
address for the company free of charge for 6 months from the purchasing
date. As with the trade license, in this particular situation, it
is not required to have a Czech address. During the first six months, the
address of the company can be transferred to the property bought with the
SVP. The price for a shelf-company should not exceed CZK 60,000 – CZK 100,000
and the entire process should ideally take about 1 to 2 working days.
The purchase
of a shelf-company carries with it certain key responsibilities, such as
filing for income tax once a year. The cost of accounting for a standard
real estate s.r.o. should not exceed CZK 10,000 per year. If there has
been no income, however, there will be no need to pay income tax.
Additionally, there is no need to pay monthly social security payments
or health insurance, if there are no employees in the company.
These steps
may overwhelm the foreigner unversed in Czech real estate, however there
are companies which have been established by various foreign owned entities
to assist investors in their purchasing process. These companies provide
all of the services required for non-resident investors and are more than
happy to help you navigate the path to your new property.
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| Formed
in May 2004, Ceres Group has been
busy assisting foreigners in the lenghty and often confusing process of
purchasing property in the Czech Republic by being designed as a "one-stop
shop" in order to fullfil all of a non-resident's needs. The
Ceres Group deals specifically with the following types of property: residential
(apartments in historic buildings, new apartments and houses), premier
properties (castles, chalets, cottages and villas), retail and commercial
(bars, restaurants and office spaces) and projects (developments in residential
and commercial properties. |
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Links to related articles &
resources:
| Living,
Working and Investing in the Czech Republic - Living,
Working and Investing in the Czech Republic |
| Teach English
Worldwide - Teach
English Worldwide - People from all walks of life are heading to
the heart of Europe to begin their adventure of teaching English abroad.
Prague, in the Czech Republic, is the perfect setting to begin teaching
English as a foreign language (TEFL). In just 4 weeks you can become certified
by TEFL Worldwide to teach English and receive job placement assistance
worldwide. |
| Jindrichuv
Hradec, Czech Republic - Jindrichuv
Hradec, Czech Republic - Don’t be blinded by the hype. Yes, it’s
true. Cesky Krumlov is one of, if not the most, beautiful places in the
Czech Republic. Never heard of it? Ask any Czech person to tell you about
Cesky Krumlov and their face will light up like a child on Christmas morning.
They’re certainly not wrong as Cesky Krumlov has the second-biggest castle
in the Czech Republic (behind Prague’s of course), a spectacular garden
to go with it, and unique architecture throughout the town on top of that. |
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