After four years of price falls, the Czech Republic’s residential market remains depressed.
Apartment asking prices dropped by 5.2% (-7.4% inflation-adjusted) in 2011, according to the Czech National Bank (CNB). In Q4 2011, apartment prices fell by 0.9% (-1.4% inflation-adjusted), and are expected to fall another 4% in 2012, according to analysts. Transactions last year were 20% below the peak levels of 2008.
The Czech economy is now in recession. It is expected to contract by 0.2% in 2012, having shrunk by 0.3% q-o-q in Q3, and 0.1% q-o-q in Q4 2011. In 2011, the economy expanded by 1.7%, following growth of 2.7% in 2010.
To cut the budget deficit, VAT was hiked in January from 10% to 14% (lower rate VAT). This is the second VAT rise since January 2010, when both standard and lower VAT rates rose by 1 percentage points, to 20% and 10%, respectively. In 2013, VAT will be unified at 17.5%.
The lower VAT rate applies to selected goods such as food, medicines, books, new housing units and housing-related expenses (water and heating). While only imposed on new houses, the increase will weaken overall demand.
The average apartment price is CZK1,747,244 (€69,478), according to realitymorava.ck, the leading residential portal. Prague 2 has the most expensive housing. The average apartment price is CZK4,889,909 (€194,445), followed by Prague 1, with an average apartment price of CZK4,453,595 (€177,095).
Apartment asking prices dropped by 5.2% (-7.4% inflation-adjusted) in 2011, according to the Czech National Bank (CNB). In Q4 2011, apartment prices fell by 0.9% (-1.4% inflation-adjusted), and are expected to fall another 4% in 2012, according to analysts. Transactions last year were 20% below the peak levels of 2008.
The Czech economy is now in recession. It is expected to contract by 0.2% in 2012, having shrunk by 0.3% q-o-q in Q3, and 0.1% q-o-q in Q4 2011. In 2011, the economy expanded by 1.7%, following growth of 2.7% in 2010.
To cut the budget deficit, VAT was hiked in January from 10% to 14% (lower rate VAT). This is the second VAT rise since January 2010, when both standard and lower VAT rates rose by 1 percentage points, to 20% and 10%, respectively. In 2013, VAT will be unified at 17.5%.
The lower VAT rate applies to selected goods such as food, medicines, books, new housing units and housing-related expenses (water and heating). While only imposed on new houses, the increase will weaken overall demand.The average apartment price is CZK1,747,244 (€69,478), according to realitymorava.ck, the leading residential portal. Prague 2 has the most expensive housing. The average apartment price is CZK4,889,909 (€194,445), followed by Prague 1, with an average apartment price of CZK4,453,595 (€177,095).
Analysis of Czech Republic Residential Property Market »
RENTAL YIELDS
Last Updated: May 07, 2011
Gross rental yields on apartments in Prague, capital of the Czech Republic, are rather low. It is only on the very smallest apartments that anything like an attractive yield is possible. An apartment of 120 square metres is likely, for instance to yield around 3.8%, which most people would not consider a reasonable return on their investment.
TAXES AND COSTS
Last Updated: Oct 24, 2011
Rental Income: Rental income is taxed at a flat rate of 15%. General deductions for income-generating expenses are deductible from the gross income.
Capital Gains: Capital gains are included in the aggregate taxable income and taxed at the normal income tax rate.
Inheritance: No inheritance tax is payable by direct relatives or spouses.
Residents: Residents are taxed on their worldwide income.
Capital Gains: Capital gains are included in the aggregate taxable income and taxed at the normal income tax rate.
Inheritance: No inheritance tax is payable by direct relatives or spouses.
Residents: Residents are taxed on their worldwide income.
BUYING GUIDE
Last Updated: Apr 02, 2008
Roundtrip costs in the Czech Republic are moderate. VAT is only applicable to newly build properties: 5% is payable on sale of properties if they are sold within 3 years of acquisition (or 5 years for secondary properties). Real estate transfer tax is 3% (payable by the seller). Total round-trip costs are around 7%-11% for properties transferred after three years of acquisition.
LANDLORD AND TENANT
Last Updated: Aug 22, 2006
Czech law is kind to landlords (although 90% of the population still lives in the old, controlled rental sector).Rents: Rents can be freely agreed between landlords and new renters of houses with vacant possession, and the parties may freely negotiate any contract length.
Tenant Security: At the expiry of the contract, the tenant must vacate; no notice need be given, and he is not entitled to substitute housing. There is no maximum deposit.
ECONOMIC GROWTH
Last Updated: May 08, 2012
Czech economy on the brink of recession
The Czech Republic is small, at only 78,864 sq. km. with a population of 10.2 million and a GDP per capita of US$20,444 in 2011. It was born on January 1, 1993, when the Czechoslovak Federal Republic split into two independent states, the Czech Republic and Slovakia. Czech Republic has been a member of the European Union since May 2004 but is unable to adopt the euro yet; it uses its national currency, the Czech koruna (CZK).The Czech economy is now officially in recession. The economy shrank by 0.3% q-o-q in Q3 and 0.1% q-o-q in Q4 2011. Overall, real GDP growth slowed to 1.7% in 2011, after registering a GDP growth of 2.7% in 2010.
This was in sharp contrast with an average GDP growth rate of 6.6% annually from 2005 to 2007. GDP growth in the Czech Republic slowed to 3% in 2008 and finally contracted by 4.7% in 2009 due to the global economic and financial crisis.
The Czech economy is expected to contract by 0.2% in 2012.
In February 2012, consumer prices rose by 3.7% from the same month last year, according to Czech Statistical Office (CZSO). In 2011, the overall inflation rate was 1.9%, slightly up from an average of 1.2% from 2009 to 2010. In 2012, consumer prices are projected to rise by 3.5%.
In 2011, the country’s unemployment fell to 6.7%, according to the IMF. But it is expected to rise again to 7% in 2012 and to 7.4% in 2013, due to the ongoing eurozone debt crisis.
Because of budget cuts, the deficit was sharply reduced to 3.1% of GDP in 2011, from 5% of GDP in 2010. The country has a debt of just about 40% of GDP, well below the EU average.
The center-right government of Prime Minister Petr Necas survived a parliamentary vote of confidence held this April 27, 2012, amidst the break-up of the centrist Public Affairs coalition and tough spending cuts. His survival contrasts with the collapse of governments in Romania and the Netherlands, which were unable to maintain support for austerity.
RSS
Global Property Guide on Twitter
Global Property Guide on Facebook
Global Property Guide on Linked In