Prague Property
Prague is the cultural heart of central Europe and a key business centre. Not only has FDI in the Czech Republic been growing for several years now, it has also been the highest in the CEE region in recent years. Prague is the main recipient of this influx of investment in the IT, banking and finance sectors which continue to creating the jobs which contribute to the city's rising income levels.
This has helped propel Prague's property market into a mature phase of development. The city is now the blue chip investment location of choice for investors seeking stability with high levels of capital growth still possible depending on location, which is now becoming a key factor in this market.
PRAGUE KEY FACTS
Unemployment in the Czech Republic fell from 8% to 6.1 % in 2007, while unemployment in Prague is just 3.5% according to latest figures. Falling unemployment has resulted from
increased government investment and high levels of FDI.
Prague has one of the most established rental markets in Eastern Europe thanks to the increase in wages and influx of foreign companies and workers.
Demand continues to outstrip supply of new flats by a wide margin and this looks set to continue in the medium term. Even with this strong price growth, prices are still only 38% of the EU average.
Continuing deregulation of the rental market, along with increases in VAT rates for developers, will, without doubt, affect the market and are likely to push prices upwards. Rent levels were effectively frozen at 2002 levels, however complete deregulation in 2011 will remove any remaining restrictions, pushing up rents in desirable areas of the city in the process.
The market is more mature and, therefore, more liquid than many other Eastern European cities.
Prague saw turbo-charged growth in property prices in the three years before joining the EU in 2004, before easing to 10% per annum in 2005.
In 2006, there was a resurgence of the property price growth, at around 15%, due to a number of stimuli, including a rise in VAT in 2008, when VAT on construction rose from 5% to 9% on apartments below 120 square metres.
A wave of regeneration and price growth is moving out from the city centre in a classic case of second phase market growth. This will be followed by a more prolonged phase of moderate price growth with a consistently strong rental market, which every investor should take advantage of.
Prague continues to attract a huge amount of FDI and, consequently, unemployment remains low in the city, while wages are rising steadily.
A unique combination of factors likely to influence the property market in Prague, prior to 2010, include an imminent rise in the VAT on construction and the deregulation of rents. The latter will have the effect of pushing up rents in central areas of the city and therefore increasing demand for housing in less expensive suburban locations.