Long discussed change in Czech tax law connected to real estate was finally approved - abolition of 4% acquisition tax. This article contains information you should know about this topic as the owner or prospective buyer of the Czech property.

Evolution of Czech real estate tax

This tax has been considered as a controversial since its adoption in 2014. Perhaps that is also why it has undergone dynamic development in recent years and was cancelled eventually. Firstly, we briefly summarize how this tax evolved.

Until the end of 2013, the tax was 3% of the value of the transferred real estate. Until 2014, it was paid by the seller (transferor of property), who received money for the sale and the buyer (acquirer) was only in the role of guarantor. The only exceptions were sales at auctions, insolvencies or other sales based on the court (or executor) decision where the real estate transfer tax was paid by the buyer.

From 1 January 2014, the real estate transfer tax was renamed to real estate acquisition tax. Tax law gave a possibility for contractual parties to decide that the buyer will be the taxpayer even in a standard sale. However, this was only the case if the seller and the buyer expressly agreed on this fact in the purchase contract. If the taxpayer was the seller, the buyer remained the guarantor.

Finally, from 1 November 2016, the buyer become the taxpayer in all types of real estate sales and the amount of tax remained four percent of the value of the transferred real estate. The institute of guarantee by the other party was abolished. This additional purchase costs of 4% had significant impact on buyers’ finances at that time, especially in bigger real estate transactions. Years 2016-2019 were years of Czech real estate prices explosive growth. Therefore, buyers had no choice but accept their new tax duty as another additional purchase cost. 

New legislation in 2020 

Everything changed in September 2020 because 4% acquisition tax has been cancelled after long discussions in Czech parliament about final form of this new legislation. Additional information needs to be provided, as several other important changes in real estate tax laws are related to new legislation.

Firstly, the law has uncommonly a so-called retroactive effect (means that it regulates also past events). The tax abolition applies to all taxpayers whose tax is due by or after 31 March 2020. This group also includes all real estate purchases for which the registration of the ownership right in the Real Estate Cadasters was made from 01.12.2019 onwards. Even if you already have the tax due, you do not have to file a tax return.

The new law package contains also other fundamental changes - the period for income tax exemption in case of resale of real estate will be 10 years from 2021 (now it is only 5 years). For example, if you purchase a flat in 2021 and sell it again before 2031, you will have income tax duty from this sale (note: income tax base in this case is counted from difference between your purchase and sale price).

Will Czech real estate prices react to the abolition of acquisition tax?

“It is clear that buyers now will be able to buy much better, which will be noticeable especially in sales of more expensive apartments or houses”, says real estate agent Jan Griger from RE/MAX franchise. “For example, at a price of CZK 10,000,000, buyer would have to pay the 4% tax in amount CZK 400,000. Now instead, the buyer will be able to buy, for example, a new kitchen unit or perfect equipment for the apartment.”

It is important to remember that the abolition of 4% tax is not directly affecting prices of apartments in new residential projects because the first sale of a new flat in new project or house was always exempted from this acquisition tax. This tax was also not paid in cases of the transfer of cooperative apartments.

We assume that buyers can now benefit from a combination of two benefits in case they purchase real estate until the end of this year as:

1. For real estate acquired before the end of 2020, the income tax exemption period remains still only 5 years (10 years will apply to real estate acquired from 1.1.2021 onwards),
2. The obligation to pay real estate acquisition tax was cancelled as we described above.

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One of the things which makes Prague into a leading real estate investment site is its architecture. In fact, Prague can also be called "a world architectural treasure" without any exaggeration. Unlike other cities, where one can usually see one or two dominant architectural styles, in Prague one can be wowed by all of the central historical architectural styles in Europe: Romanesque, Gothic, Baroque, Art Nouveau and many others. And if this is not enough, Prague has several architectural styles that developed into specific sub-styles that cannot be found anywhere else (for example, Czech Rondo Cubism, also known as Czech Art Deco). These architectural styles are expressed both in residential buildings and commercial buildings.

In order to avoid boring you, we will explain this complex topic to you in a manner which will be easy to digest and understand. To do so, we have tried to make this guide an enjoyable and example packed text as possible. So let's leave on a short chronologically – historically ordered tour in everything art afficionados might find to be of interest in Prague. We will start off with 1000-year-old architecture and conclude with fascinating contemporary architectural projects.

Romanesque architecture in Prague: the story of the cannonball in the wall

Romanesque architecture was inspired by the ancient Roman architecture and was typical of 11th to 13th century European architecture. The typical Romanesque structure had thick walls, thin windows, tall towers and massive supporting pillars. A famous example of Romanesque architecture in Prague is the Rotunda sv. Martina in the Vyšehrad fortress Park. this Rotunda structure is the most ancient of its type to be preserved and is beautifully set off on the background of the lovely scenery of Vyšehrad Park. When you are near it seek out the cannonball imprinted at the front of the building.

Another type of rotunda structure is the Rotunda of the Discovery of the Holy Cross (Rotunda Nalezení sv. Kříže). What makes this structure so fascinating is not only its own beauty, but also the completely different architecture surrounding it – as if it had been forgotten in place (or as if it belonged to another place and time).

Gothic architecture in Prague: the kind you can’t miss

The gothic style, which originated in France, dominated European architecture between the 13th and 16th century. You should definitely visit some of Prague's spectacular Gothic cathedrals. As soon as you enter, imagine that you are medieval residents of Prague, standing in awe before the glory of the kingdom of heaven. That effect is, of course, precisely the underlying premise of the gothic style cathedrals – to get the Christian faithful to feel 'small' compared to the power of Jesus and the Christian Church.

• There are two cathedrals you won’t be able to miss in any event, given their location in Prague's tourist center- the Prague Castle and the old city square:
• The Cathedral of Saint Vitus, located in the Castle of Prague, the Church of our Lady before Tyn (Tyn Cathedral) located in the old city square of Prague.

Renaissance in Prague: let's play ancient tennis!

Renaissance architects mostly sought to revive the classic architecture of ancient Greece and the Roman Empire. The renaissance period of Prague is dated between the 15th and 17th centuries. An unforgettable element of the Renaissance architecture is Sgrafitto, a method similar to wall painting (fresco). One can find an incredible example of this in the Míčovna building, when one wanders through the beautiful royal gardens near the Prague Castle in the Hradčany Prague Quarter  (The Castle Quarter). The meaning of the name Míčovna is banquet hall. This hall was used as a sort of sports hall for the nobility, where they played an ancient version of tennis.

That famous Prague Baroque

The first association people have in regard to Baroque is that of angelic cherubim with plump bellies and chubby hands, who cavort and play on the columns of churches. For architecture neophytes, Baroque is often the most recognizable style. Baroque in architecture is very intense, it makes use of many decorations, dramatic décor, colorfulness and extravaganza. The Baroque style sought to make those who viewed it to feel very emotional and involved in the artistic creation.

And indeed, the baroque style distinguishes Prague in terms of architecture. It can be found anywhere – from residences to castles and churches.

If you wish to enjoy the pinnacle of Baroque architecture in Prague, we recommend you take a long walk from the old city quarter Mala Strana towards the Loreta Square. This walk is a magical and enriching experience. As soon as you reach Loreta, don’t miss the massive Chernin Castle, whose main façade, 150 meters long, faces the Loreto Compound, and serves as the residence for the Czech Foreign Ministry.

The neoclassical style.

Much like the renaissance, the 19th century neoclassical style was heavily influenced by ancient Greece. Nonetheless, the 19th century, unlike the renaissance, did not require quite as many sumptuous palaces. That is why the neoclassical style was usually implemented on public buildings such as schools, hospitals and administrative buildings. A splendid example of this style are the capitol hill buildings in Washington D.C. , in the United States.

In Prague, the most famous neo-classical building is the "Estates Theater" (Stavovske Divadlo) built in the Old City of Prague in 1783. This theater was considered one of the most beautiful historical theater structures in Europe and was a centerpiece of the national Czech theater. The history of this theater is also closely associated with that of the genius musician Wolfgang Amadeus Mozart – the world premiere of his opera Don Giovani was performed here and is still included in the repertoire.

The art nouveau of Prague and Hollywood films.

The motifs of the art nouveau architecture are flower and leaf patterns, combined with descriptions of beautiful women. The art nouveau architects also sought to eliminate the differences between visual to practical (everyday) arts, or classical art and modern art.

The most distinctive symbol of the Prague art nouveau architecture is the Prague Town Hall (Obenci dum) whose construction was completed in 1911 in what is now the Republic Square. Even in this case, this is precisely a case of a "must see" structure, which you can't miss when you are in Prague. Every visitor to Prague passes at least once in the Republic Square, so simply notice what is around you when you are there.

Another great building is the Grand Hotel Eyropa, located in the Vaclav Square. This hotel was renovated into an art nouveau style back in 1905. Its extraordinarily decorated façade also appeared in Hollywood films. For example, it served as a template for the décor of the restaurants in the "Titanic" movie, and also served for real filming of scenes from the movie "Mission Impossible" (1996).

Pseudo – Moorish style – a little oriental exoticism in Prague.

This is a fascinating and truly exotic style which was influenced by Europe's min 19th century artistic romanticism. The romanticists were fascinated by anything which seemed oriental to them. In Prague, the Moorish revival style was mostly adopted by the Jewish Community, which made use of it in the decoration of synagogues. The most famous examples are the Sephardic Synagogue in the Josefov Quarter and the Jerusalem Synagogue (Hayovel) near the Vaclav Square.

Cubism in architecture – a Czech phenomenon

You've surely heard of Pablo Picasso, right? And you must have seen some of the creations of the more familiar cubist artist. In principle he performed a geometric processing on everything, creating completely unique paintings. But how can cubism be transferred from canvas paintings to building facades? Well, very few architectures around the world made the attempt. It was in the Czech Republic, in the early 20th century, that the cubist principles began to be uniquely implemented on building design.

A Czech school of cubist thinkers, architects and designers became so unique and renowned, that the Czech branch of cubism was granted its own name: rondo cubism architecture. This style is characterized by greater decorativeness than ordinary cubism in architecture.

A surprising connection between Czech cubism and real estate investments can be found in the iconic cubist building of the Adria Palace, in the street corner of Narodni and Jungmannova. One of the centrals lease holders of the Adria Palace is the leading energy distribution company in Prague - Prague Energetics, who have an energy supply contract with most apartment owners in Prague. That is why every time an apartment owner sells, purchases or leases out his apartment, he needs to go through the PRE employees in the building. No real estate agent in Prague is unfamiliar with this building.

Another prominent cubist architecture building that is very popular with tourists is the Grand Orient Café in the Old City of Prague – it is considered to be the only cubist café in the world.

Socialist architecture – an unloved legacy of totalitarianism

Honestly, this is not something the residents of Prague are particularly proud of. But for good or ill, socialist architecture is part of the scenery, and can be perceived as part of the legacy of the ling period of communism, imbuing it with real testimony in the field. 

Socialist articles usually could not be creative or bring in their own design ideas. They were usually constrained to work according to standard concept approved as "politically correct". An example of this attitude is socialist realism. This style has usually been used to design representative structures of the state and led to the design of identical buildings throughout the Soviet Union.

The International Hotel in the Dejvice Neighborhood in Prague is an early example of this. It was constructed in the early 1950s under the supervision of the Ministry of Defense of the dictator Stalin in Prague. The hotel was strongly inspired (or simply plagiarized) by the Stalin Towers – a group of seven multistory buildings in Moscow, built as a symbol of pride in the Soviet Empire.

Prague's prefab buildings

We will now review a more common communist architectural "style", one that can be found everywhere in Prague – the panelak neighborhoods. Prague is considered by the world (and aspires to be) a beautiful city packed with magnificently designed neighborhoods and quarters. In reality, however, tens of thousands of Prague residents live in "panels" – blocks of prefabricated buildings who were so typical of countries under Soviet rule or influence.

During communist times the goal was to build as many apartments, as quickly as possible. As a result, the panelank buildings show zero creativity and aestheticism. This type of residential building dominates the neighborhoods of Prague that are farther from the center of the city.

A fascinating glimpse of Prague's contemporary architecture

One can proudly state that there are so many buildings with extraordinary décor from the past two decades that it is very difficult to select only a few examples. But we still tried. 

A great example of innovative, daring and progressive design which has recently made incursions into the residential structures of the Old City is the "Dancing House" in the Jirásek Square, only a few meters from the Vltava River. The shape of the two towers of the building was inspired by the famous dancing couple Fred Astaire and Ginger Rogers. Currently, the structure serves as a hotel, a gallery, and prestigious office space.

Another daring example is the DRN building, which brought a little piece of nature into downtown Prague. When you look at aerial photographs of it, one can easily imagine it to be a verdant hill, because vegetation and greenery cover the entire façade of the building.

Innovative and important architecture for the development of new residential real estate

"Marina Island" on the Vltava River

A project of the Israeli entrepreneur DARAMIS, on a spectacular location on a peninsula jutting into the Vltava River. Buildings harmonically designed by the prize decorated architecture firm of Moshe Tzur and the AED project offer serenity, comfort and bountiful nature to all visitors. In contrast, the bustle of the city, employment opportunities, shops, cafes, culture and sport and everything else one might desire are only a short walk away, and the project is no more than eight minutes away from the center of Prague.

The V Towers – the first luxury residential skyscraper in Prague.

This V shaped building has a unique appearance. The apartments in the top floors offer a spectacular view of all of Prague – for the right price. The rate of the penthouses in the top floor reaches 200 million Czech Korunas (almost 8 million Euro!).

This is the first European residential project with the Leed Platinum certificate, the certificate requiring the most stringent environmental, operational efficiency, a residential comfort condition. The project has won two prestigious international assets awards. In the "multistory development" categories the project was awarded with all five possible stars, whereas in the "high rise residential architecture" the project reached the world finals and was designated one of the eight best buildings in the world.

The Dock Residence Project

The motto of the real estate developer Crestyl is "always look for the wow effect". This certainly applies to this magical project on both banks of the Vltava river. Part of the residence is a small pier where boats up to one meter long can dock. The project incorporates residential buildings and green commercial buildings. As a result, a new 'quarter', packed and bustling, is created – during the day it is filled by employees, and at night by residents. The project has won many architectural awards, and its new stages are still under construction, in order to create a sort of a magical "city within a city".

Green, innovative, office buildings in Prague

Primary trends in commercial real estate are the sustainability trend and the trend of modern office solutions, such as flexible or shared workspaces. One of the leading examples of implementing these trends can be seen in the "Visionary Building" constructed by the real estate developer CA Immo In the bustling Holašovice quarter. The project not only ensures healthy work conditions for workers, but fun as well. This is the first building in Prague with a running track on the roof, and the building holds the LEED Platinum certificate, the highest energetic rating a building can be awarded with.

Another flagship project of this contractor is the Amazon Court office building. "Who said Prague cannot have a jungle within the city?" was the question presented by the developer CA Imno during the construction of the Amazon Court in the Karlin District. The building won several international awards, particularly for its ecological solutions. Its seven stories are dominated by a beautiful interior atrium which is filled with daylight, greenery and pools of water. It is a place where you can breathe refreshing air and chill out, even in the middle of a workday.

In Karlin you can also find the building with the largest vertical garden in Central Europe – AFI Karlin, built by Africa Israel. Beyond being simply beautiful, the vegetation reduces the dust and regulates the air moisture and the temperature of the façade. Around 60,000 plants grow over a total area of 1,400 square meters. Every office in the building is capable of regulating its temperature, ensuring maximum comfort for workers at the site.

Mosaic house in the center of the city of Prague is the first hotel in the Czech Republic to earn a BREEAM excellence certificate. The building uses 100% renewable energy, a gray water system. The building includes additional environmentally friendly means such as solar panels on the roof, rooms with automatic air conditioning responding to the occupancy of the room, electric shading, RainDance technology showers, low flow restrooms and energy parsimonious lighting.

Summary

In this article we have tried to give you a hint of the conflicts and surprises you might find when you discover Prague's architecture. If you are real estate investors considering the purchase of a property (an apartment or a building) in the Czech Republic, we are sure you will find this article extremely useful. If, as your interest develops, you will find yourself in need of assistance in moving forward, we will be happy to help you, both in the purchase and in the management of the property thereafter.

Buying apartments in new residential projects in Prague is an interesting investment opportunity for many reasons. Newly constructed apartments close to downtown Prague (Prague 3 to 9) are in high demand given their slow supply on the market. Czech construction regulations really drag our the construction permit process, making it impossible for Prague developers to satisfy increasing demand and pushing new apartment prices constantly up. In addition, new apartments are a desirable housing option for reliable tenants. Accordingly an investor will have a relatively easy time renting out his property to good tenant and can usually price rent higher than a common secondhand apartment.

We have met many of Prague's leading residential real estate development companies face-to-face and have established special cooperation terms with them. This direct connection helps us to secure more attractive conditions for our clients. This often include a discount in purchasing new apartments for the buyers we represent. Other benefits can include favorable financing (see further), longer payment periods and generally better contractual conditions. Here we list several benefits we can provide to clients when representing them in deals with developers. Those benefits obviously provide an added value to their investment.

1. Be among first who to receive an offer! 

As business partners to of many pf Prague's developers we receive many presentations of new residential real estate projects in Prague before they reach the general public. That is how we are able to select the apartments that are most suitable for an investment before they are booked by someone else. 

2. Take advantage of favorable financing: 15% down payment now, the rest after the apartment is completed. 

Projects that we offer to our clients benefit from the following financing structure:

• Reservation fee payable after the conclusion of the Reservation Agreement. It usually makes up 2% of the total purchase price, generally around 95 000,- CZK, incl. VAT tax
• 15 % of the real estate price, incl. VAT is payable after conclusion of the Future Purchase Agreement (further as FPA). FPA needs to be signed usually within 1 month of signing the Reservation Agreement. Once the FPA is signed there is usually a 1-month period to pay the second payment. That means the buyer has around 2 months altogether to collect his 15% down payment after signing the Reservation Agreement.
• The final payment, to the sum of 85 % incl. VAT following project completion. This is usually achieved within 2 years of signing the Reservation Agreement. That means there is a plenty of time for our clients to collect their 85% either from their own funds or by taking out a mortgage in the Czech Republic. 

Over our decade on the Czech Republic real estate market, we’ve employed a variety of investing strategies. Here, we list those we consider to be essential to our success on the extremely competitive Prague real estate market. Further we describe practices and software tools we use on daily basis to improve our sourcing and analysis of investment deals. We also systemized a process of deal presenting to our clients so that we can act faster than our competitors. More than this, our overall strategy is to gain as complex experience in the field as possible to dramatically increase our worth for clients.

1. We aim to be the first to know about the best deals.

How? By constantly developing a lead funnel of "off market" offers. We see real estate as a relationships based business. Accordingly we have invested, and continue to invest, a lot of time and energy in creating and developing valuable connections across the market. After many years of active business development efforts, we become an integral part of the unofficial realtors’ network in Prague. Barely a day goes by in which we do not receive some offer from one of our colleagues, which include real estate agents, investors and other realtors. Many of the offers which come our way are "off market" - unlisted on any Czech public real estate platform.

There are various reasons why sellers might wish to offer their properties "off market". For instance, when the property on sale is an apartment building, the seller often wishes to keep the information about the sale from spreading among his tenants. Another common reason is that the seller simply wants to save himself the marketing costs and therefore seeks to the word about the sale via his network of his real estate investors contacts before he lists the deal publicly. This is often the case in smaller developers’ projects.

We are subscribed to the mailing lists of all Prague major developers. We have met many of them face to face and have negotiated special cooperation terms in personal meetings. As a result we receive many presentations of new residential real estate projects in Prague before they reach the general public.

Such off market real estate offers in Czech Republic are often very interesting for investors, since their conditions can be quite attractive. And we don’t just mean good pricing. But often there can be other benefits – interesting deal financing options, property location growing potential, discount possibilities etc. 

2. We also purchase directly from properties owners.

Our daily routine includes screening real estate listings from private individuals. It is very common practice in Czech Republic to sell, purchase or rent a property without any help from real estate professionals. is the primary reason for this is the widely spread distrust of real estate agents due to the absence of proper regulation of their professional entry requirements, due to poor legislation. Such real estate agent absent transactions represent a very significant portion of Czech real estate deals. Therefore, there are quite a few websites which specialize on this type of listings.

What makes those deals potentially interesting for investors? If the owner sells without an agent, the price is often lower because the owner does not know the market well as a professional agent and may price the property much cheaper than the market would allow (of course, they quite frequently overprice very their property and cannot secure a purchaser)

To make searching for these deals more effective, we use specialized search engine software for investors with paid subscription. These engines monitor private listings market on an hourly basis and we are rapidly notified if a good offer surfaces.

Deals with owners are often more challenging in terms of negotiation, since the seller is not a real estate professional and that communication with him may be more emotional and volatile. It is therefore very important for buyer to be familiar not only with general real estate negotiation strategies but also with the mentality of the local real estate owners.

3. We tack developments in real estate prices based on data from the Czech Land Registry

Statistics show and average 10-15%  difference between the listed prices and the final closing prices of real estates in the Czech Republic(in Prague 1 and 2 the difference is over 30%). Therefore, it is extremely important to be aware of the final prices for which a property in a particular location has actually been sold. For this purpose we use another prepaid tool – Pricemap – which collects big data from all real estate sales registered in the Czech Land Registry (every real estate purchase in Czech Republic must be registered in the Czech Land Registry “KatastrNemovitosti”). 

Knowing the real closing prices of real estate deals gives us the confidence we need not only to optimize the outcome of negotiations but also in our business planning. Especially when working on sales projections for bigger real estate projects, we want our business plans to be as accurate as possible. Therefore, we always analyze real prices from Pricemap.

Overvaluation of listed prices of real estate in Prague neighborhoods. Y axis: overvaluation in %. X axis: timeline

From Czech Real Estate Conference 2019.

4. We systemize the process of deal presentation to our clients and closing.

The hard truth about investing in real estate (not only) in Prague is that attractively priced deals disappear in days, even hours in some cases. Every fifth apartment in Prague is bought by investor. So there is really big competition between investors in Prague market.

Our position as deal broker is even harder because we need to wait for client´s approval about closing the deal. We try to mitigate this time disadvantage by using a systematic approach:

• We share a virtual viewing with our client immediately after visiting real estate, using WhatsApp or similar cloud tool
• We have executive viewing summaries templates which are very structured and provide investors with clear and detailed information about investment opportunities.
• We don´t wait for the client to come from abroad to sign reservation contract. We could easily lose sellers by such a rigid approach. We ask clients to sign power of attorney over to us and send us their scanned signatures immediately. As such, we can sign reservation contracts on their behalf immediately after they provide us with consent to do so.

5. We are not afraid of difficult transactions, if the price and potential benefits justify them. 

We have gained  broad experience and knowledge in hundreds of real estate transactions done in the Czech Republic. We work with lawyers, accountants, bankers and other professionals specialized in real estate transactions. We know how to purchase a problematic property for a low amount of money. However, in such cases we always ask ourselves the question – is this property really worth our time and money? If the answer is positive and we can eliminate the potential risks of deal by thanks to our experience and knowledge, we provide the seller with our offer.

What kind of challenges are we talking about? It can be the purchase of property with the pledge of private creditor. Or a scenario in which the owner wants to sell his apartment now but for various reasons wishes to continue living in it for a few more months. Or a case when the subject of purchase is not a property itself but an SPV company which owns the property. Most of the time such deal require us to invest some extra time and resources into due diligence process, contracts negotiation etc. But it pays off once the deal is finalized and the problems are solved, because the value of the property increases dramatically. Also, if the deal looks more complicated at first glance, there are fewer potential purchasers. This represents a good opportunity for professional investors to negotiate good price.

6. We can help our clients to invest in “fixer-upper” properties 

Properties which require redesign and reconstruction are typically offered at a low purchase price. Every year we carry out many reconstructions of apartments. We have experience with the whole process of reconstructions – interior designing, budgeting, allocating resources (people and materials) and project management. Therefore, we can do the math for our clients. We calculate the finances and time scale of such a project as well as the expected profit after increasing the value of the property. And after purchase we can do the reconstruction project management.

7. We try to learn the real estate business from all sides

We are used to act daily in various roles: as an investor, real estate agent, property manager, construction manager or business consultant. 

As is well known external financing is often an attractive way of leveraging your capital and transforming a good investment into an excellent investment.

Until a year ago international investors, including Israelis, enjoyed the possibility of securing extremely generous morgatges from Czech Republic banks. However, about a year ago the Czech banks completely cut off credit to foreign investors. This was a purely business decision which sought to reduce risks deriving from overexposure to foreign investors.

However, following a long negotiation with one of the largest banks in the Czech Republic, we are pleased to announce that we have finally established an extremely comfortable loan avenue for Israelis to purchase real estate assets for investment in Prague (the capital of the Czech Republic) and Pilzen (the fourth largest city in the Czech Republic).

From this day (1 May 2019) forth, investors seeking to secure financing for their acquisitions need not be citizens or residents of the Czech Repulic. Yes, Israeli investors can also secure financing of up to 60% (!) to purchase revenue producing real estate in the Czech Republic.

By the way, for projects such as purchasing buildings, renovating or upgrading them, and selling thereafter ("flipping") it is possible to secure, following the submission of a business plan, funding of up to 70% and sometimesthe same percentage of the renovation.

For additional information

The Czech Republic is considered to be a genuine tourism powerhouse. Breathtaking scenes and nature, historical cities and comfortable transportation are only some of the factors behind the country's great attraction to tourists. Being located smack in the center of Europe has also helped it become a first class tourist site. Only a few hours by train sperate the capital of the Czech Republic, Prague, from Vienna and Berlin. Thanks to the Schengen Agreement, travel between these states is comfortable, affordable and does not involve any passport control checkpoints.

Tourism in Prague

Most tourists who arrive in the Czech Republic spend several nights in Prague and continue onwards to the rest of the state. However, a significant portion of them come specifically for Prague and to no other site in the country. What this means is that from year to year the number of tourists visiting Prague is constantly rising. For example, in 2018 Prague registered a rise of 3.2 percent in the number of tourists in the city compared to 2017 – roughly 8 million visitors to a city with a population of only 2.5 million people. This is after 2017, which is considered a peak tourist year – with over 20 million tourists in all of the Czech Republic (a rise of over 9% in comparison to 2016).

The impact of tourism in Prague on the residential real estate prices in the city

One of the influences of tourism is on the cost of apartments, particularly for the purpose of short term tourist rentals. The data of the central office for statistics in the Czech Republic indicates that in all of the Czech Republic, the number of visitors to the various hosting sites such as Airbnb (and other such platforms) has reached 21.3 million in 2018 – 1.3 million more than in 2017, which constitutes a rise of 6.4%. the great demand for short term living accommodations leads to an often double digit return on investment for residential apartments purchased in Prague.

Another effect of tourism is on the prices of second hand apartments. A survey performed in the field by the Bezrealitky Portal has found that Prague is the most expensive city in the Czech Republic in terms of real estate. In Prague, prices have reached 80,361 Czech Korunas per square meter (According to other surveys, these prices have reached 101,091 Czech Korunas per square meter). The prices of private homes have also risen over the past year and Prague has registered a rise of 36% in their prices (Up to a level of 68,647 Czech Korunas per square meter).

What does the future hold?

The expectation is that the real estate prices in Prague will continue to rise and in some areas even more than in the previous year. For example, in the center of Prague and in sites that are a short distance away from the capital. The reasons for this, other than the rising tourism, are many, such as non availability of rental apartments in the areas of greatest demand, construction laws which place encumbrances on the beginning of construction, long processes to receive construction permits and the absence of infrastructure to expand real estate supply.

Are you interested in investing in Prague? Join us

Data from various sources indicates that, much as expected, the real estate prices in Prague are only rising and that this trend is not expected to change. The projections were that a rise of 10% in 2017 and a rise of 7.5% in 2018 would take place but of course reality exceeded all expectations : in 2017 the price rises were 13.3% , the highest rise in the European Union countries.

The Graph below (Source) illustrates the changes in prices for new apartments between 2013 – 2017 after the removal of outliers amounting to 5% of the most expensive and least expensive apartments.

An additional study indicates that over the years 24014 – 2018 the real estate prices in Prague have risen by 59.3%, so this represents a stable trend of increasing real estate assets value (source).

What is the significance of this in terms of price per square meter?

In 2016 the price of new apartments in Prague reached an all times record high – 60,000 Czech korunas per square meter. This record however was broken in 2017 – on that year the average price per square meter in Prague for all types of apartments (new and second hand apartments) was 65,000 korunas. In this year the most popular districts for investment in the city were Prague 1, Prague 2 and Prague 6. The significance of this is that the price of, for example, a 60 square meter apartment (the average apartment size in Prague) has risen by over ten percent in 2017 alone. The graph below proves this (Source).

In 2018, the average price of a new apartment in Prague rose by 18.6% to over 101,061 Czech Korunas per square meter. In addition, the restrictions placed since June 2018 in the field of mortgages makes the dream of purchasing an apartment almost impossible for many Czechs.

The significance of all this is that as the quality of life in Prague continues to rise, purchasers of apartments are forced to settle, both in terms of location and in terms of the size of the apartments, in order to enjoy affordable housing. Inexpensive housing at a level of beneath 60,000 Czech Korunas is almost unobtainable.

The price rise per square meter in the Prague 1 District 

The significance is that a 50 square meter apartment which cost 6,750,000 Czech Korunas in January 2017 today costs 7,650,000 Czech Korunas

The price rise per square meter in the Prague 2 District 

The significance is that a 50 square meter apartment which cost 4,820,500 Czech Korunas in January 2017 today costs 6,075,000 Czech Korunas

The price rise per square meter in the Prague 3 District

Here, a 50 square meter apartment which cost 4,125,500 Czech Korunas in January 2017 today costs 4,825,000 Czech Korunas

The price rise per square meter in the Prague 9 District

The significance is that a 50 square meter apartment which was sold for 2,950,000 Czech Korunas in January 2017 today costs 3,910,000 Czech Korunas

The housing shortage in Prague is only growing more acute 

Over 2018 only 5000 new apartments were apartments - a decrease of 9% in comparison to 2017. That was the lowest level since 2012 and a decrease of 30% in comparison to the peak year of 2015. Most of the apartments that were handed over were in Prague 5 (23%), Prague 9 (20%) and Prague 10 (17%). The lowest level of new apartment handover was registered in Prague 6 – only 2%. This level is projected to decrease further in 2019 to 4600 new apartments.

The contractors claim that as usual part of the problem derives from the fact that few new construction apartments are being provided – what prevents them from meeting the rising demand for new apartments in Prague. Additional reasons are the new guidelines in the field of mortgages and rising interest rates.

What this means is that smaller apartments may be more expensive per square meter, but they are less expensive than large apartments. The most expensive apartments are 1 + KK deployment apartments at an average cost of 120,000 Korunas per square meter. After them in the price range are apartments in the KK +3 deployment sold for, on the average, 92,000 Czech Korunas per square meter. About 70% of the apartments in Prague were sold for a price higher than 90,000 Czech Korunas per square meter.

It is therefore no wonder that the scope of real estate transactions in Prague has declined by a third in 2018 – to only 60 billion dollars. Some 60% of the investors are locals and some 20% are Germans who identified the potential for investment over the border. In other words, purchasing an apartment in Prague offers them a very fine return on investment from rental fees alone.

The rental prices in Prague continue to rise

In Prague, an average rise of 2.5% a year in lease. Nonetheless, in comparison to other European cities, the rent rates in Prague were the lowest this year. Only in Warsaw was a higher rate registered – 4.3%.

Prague was fifth in the survey of the KPMG company which examined the rent rates in Europe : first ranked were the German cities Munich and Berlin (at 11,345 and 10,142 Czech Korunas per square meter respectively), Vienna (7913 Korunas per square meter), Warsaw (7376 Czech Korunas per square meter).

Are you interested in purchasing real estate in Prague? Please contact us and we will be delighted to help you locate a great investment in this beautiful city.

On January 2019 the minimum wage in the Czech Republic will rise by 1150 Korunas to 13,350 Korunas. This rise is projected to influence many financial obligations such as income tax deductions, the income tax rate and tax benefits for working parents.

The rise in the minimum wage is expected to jeopardize the statues of the Czech Republic as an inexpensive country, that is as one of the countries in the European Union where salaries and labor costs are particularly low. However, since the raise is not limited to those who receive minimum wage (some 150,000 people) it is expected to impact the entirety of the market.

As a rule, a higher wage results in higher tax and health insurance payments, both on part of the employers and on the part of the employees. The health insurance in the Czech Republic today constitutes 13.5% of the wages and the minimum payment is 1803 Czech Korunas a month. The minimum wage constitutes the basis for calculating the health insurance of tax exempt individuals such as part time employees, students and the unemployed.

In addition, the minimum wage constitutes the basis for calculating the maximum possible subsidy for unemployment subsidies – the ceiling is equal to half the minimum wage. In addition, the minimum wage affects the pension which is considered to be tax exempt up to a certain ceiling – up to 36 times the minimum wage. The minimum wage also serves to calculate some of the tax exemptions for working parents and hence is also expected to influence this field.

The significance is that the rise in the minimum wage contributes, among other influences, to the national budget. The revenues of the Government of the Czech Republic is projected to be 1.26 Czech trillion Czech Korunas more than in 2018, primarily thanks to various taxes and fees. That is why there is no wonder that there are already those in the Czech Republic calling for an even greater increase in the minimum wage.

More on wages and salaries in the Czech Republic.

Question – how long does it take to lease an apartment in Prague?

Answer – it all depends on what you are seeking and what your requirements are. If you are looking for a reasonably priced apartments in the center of the city then you need to hurry up – the demand for apartments in this location is high and they are often leased within 48 hours of being advertised. Small apartments for short term lease are also difficult to obtain

The Na příkopě street in the Old City of Prague is now the 19th ranked street in the world in terms of rent rates, according to a study performed by the Cushman and Wakefield Company which reviewed the rent derived from apartments in 446 streets in 65 countries.

The most expensive street for rent in the world is the Causeway Bay Street in Hong Kong. The second is fifth avenue in New York. In Europe the most expensive street for rent was the New Bond street in London – a ranking which made it the third highest street in the global ranking.

However, thanks to the rise of 5% in the rates of rent over the past year, the Na příkopě Street in Prague 1 has reached the 19th rank this year (2018). The average rent per square meter in this street is 6000 Czech Korunas. (!)

One of the factors impacting the height of rent is the location of the apartment on the street and its size. The most attractive apartments are corner apartments or studio apartments. The latter usually charge higher rent.

Another apartment in Prague considered expensive in terms of rent is the Pařížská street. However, the Pařížská street is not a residential street for the most part but a commercial and trade boulevard. Another difference is that the Na Příkopě street is more touristic so that the potential market of tenants is more wide range than the Pařížská street.

Nonetheless, this street also has international brands such as Tous, Vapiano and Swarovski and includes the flagship store of the international brand H&M. The street is already considered the most important shopping street in the Czech Republic given its location.

It is however important to note that this street has yet to reach its full potential and in the near future its attractiveness is still projected to rise. Among other things, the renovation of the Savarin palace that will be connected to other buildings in the street and the renovated Václav Square is planned. In addition, the street is projected to be the site of additional business compounds, such as in Václav Square and the National Museum.

Are you considering the purchase of real estate in Prague? Talk to us.