Home insurance in the Czech Republic

posted 10 Nov 2018, 07:32 by Conbiz Info Center   [ updated 10 Nov 2018, 07:33 ]

Home insurance in the Czech Republic

I woke up, feeling wetness in my bed. Since I had celebrated my second birthday a long time ago, this seemed a bit odd to me… what the hell was going on here? I rose from my bed and turned on the light and was more than a little concerned by what I saw – a miniature rainstorm in my bedroom which changed the color of the ceiling from white to drippy yellow…

I instinctively began to grab my valuables and remove them from my bedroom: my computer, iPad, wallet a watch, all of them soaked by the water which did not stop dripping from the ceiling. I woke up my girlfriend with a yell and asked her to run and flip down the electric switch in order to cut off the current in the apartment and prevent electrocution. In the dark, we began to clean the apartment together from our belongings, each of us barking instructions at the other, in what looked like a scene from a particularly dramatic disaster movie.

We called the fire department to help us stop the water. They arrived promptly and hurried to the floor above, where the source of the problem seemed to be. The firemen banged on the door and it was opened by a surprised looking elderly gentleman. When we entered his apartment the source of the problem was readily apparent – an open faucet and an overflowing bathtub. It turned out that our old man fell asleep, forgetting to turn off the bathtub faucet, creating a miniature shower inside my bedroom.

The end result of this minor catastrophe was a destroyed suede jacket, a few damaged computer parts, a couple thousand Czech Korunas and one sleepless night. Sitting over the following weekend and thinking about what happened, I understood that we had gotten off rather cheaply…

Property insurance is the right way to protect your property from various problems. A good insurance policy can cover you against all possible dangers to your property: this includes natural disasters such as flooding, fire, leaks, lightning strikes, hail storms, snow, falling tree damage and more. Furthermore, an appropriate insurance policy can cover even cases such as lawyer fees unpaid by the renter.

In order to receive information on different insurance policies you can directly approach one of the major insurance companies in the Czech Republic such as: 

What kind of damages can apartment insurance cover?

  • Fire, including a fire caused by an explosion, a lightning strike, a falling plane and more. 
  • Break-in and burglary 
  • Flooding, including flooding caused by a rising river, an earthquake or an avalanche. 
  • Snow caused damage, including damage caused by objects such as electric poles which have fallen on the apartment. 
  • Damage caused by a supersonic boom of an airplane. 
  • Soot and smoke damage 
  • Damage caused by sewage backup or a short circuit 
  • Damage cause by various electric problems (including high and low voltage) and vandalism 
  • Damage caused by nonpayment of rent 
  • Insurance against legal suits by tenants 

Insurance against tenant legal suites

Apartment owners are also advised to insure against legal suites of the following types: damage causing tenant death or injury, property damage, other property claims, particularly loss of income and profits, recompensation for medical costs, sick leave compensation, compensation for court commissions in the event of a legal suit and so forth.

If you are reading this article since you are considering the purchase of real estate in the Czech Republic, take a moment to consult with our experts.

The different districts of Pilsen – characteristics and atmosphere

posted 4 Nov 2018, 10:55 by Conbiz Info Center   [ updated 4 Nov 2018, 10:56 ]

The different districts of Pilsen – characteristics and atmosphere 

The city of Pilsen is divided into ten urban zones – 10 different quarters. Each of them has its own unique history, composition of residents and distinct characteristics unlike any you might find elsewhere in the Czech Republic. Pilzen is the fourth largest city in the Czech Republic and a little over 180,000 people reside within the city limits. The city is the site of a large university, the Skoda vehicle factories and the largest beer breweriesinthe Czech Republic – Pilsner Beer.

Pilsen 1 – the old city

Pilsen zone 1 was established as an administrative center when many new residents arrived in the city. This zone lay in the north of the city and is sometimes also called the "northern suburb". This is the site of the old city quarter called Roudna and a number of independent villages such as Bolevec, Bila Hora and Kosutka.

This district was previously integrated with the Lochotin residential district and later on with various other residential projects such as Košutka, Bolevec and Vinice. It is currently the largest district in the city in terms of residents (50,000 people) and is considered to be a leading district in terms of the environment, built up area to land reserve ratio, and in terms of recreational activity options.

Pilsen 2 – Slovany

The Pilsen 2 district lies in the south-eastern part of the city, spreads across 405 acres and is home to 35,000 people. The area borders on the north the central train station, in the west the Radbuza river and in the east the Úhlava Úslava river.

The Pilsen 2 district contain the following areas: Božkov, Doudlevce, Hradiště, Koterov, Lobzy as well as the eastern suburb. It borders upon the 4th, 3rd and 8th district.

The Slovany neighborhood is considered to be the best neighborhood in Pilsen. This is in fact the area around Siant Slovenska. Another interesting site in the district is the Saint Nicholas Square.

Pilsen 3

The Pilsen 3 district sprawls over 876 acres and connects the historic part of the city with new districts such as Bory, Doudlevce, Skvrňany, Nová Hospoda, Zátiší, Valcha and Radobyčice. The Pilsen 3 district is considered to be one of the most populated districts in the city.

This district contains the central square "Náměstí republiky". This is a very pleasant place to hike, particularly before Christmas, when the holiday markets are breathtaking in their beauty. You can read more on the square in the Pilsen Municpal Government Site.

Another good area for real estate investments in the city is the environs of the Americká street.

Pilsen 4 - Doubravka

The Pilsen 4 district is also called Doubravka after one of the communities which were located on the site prior to the city's expansion. This area is in the eastern sector of the city and borders Pilsen 1 on the North, Pilsen 2 on the south, and Pilsen 3 on the west. The district unifies the Doubravka, Letná and Lobzy districts as well as the peripherial towns Bukovec, Červený Hrádek, Újezd and Zábělá and Zábělá. It is home to some 25,000 residents.

The Pilsen 4 district is considered to be one of the most dynamic and fastest developing districts in the city. New residential buildings with family homes are being built up between the towns, and many empty lots are being opened up for residential construction. The future municipal real estate development plan includes continued development of the residential and industrial infrastructure and the district has become a regional immigration magnet.

Pilsen 5 - Křimice

Pilsen 5 is located in the west of the city and the river Mze flows through it. The district almost completely covers the area of the ancient village of Křimice and a part of the historic village of Radčice.

Pilsen 6 - Litice

This area lies in the southern part of the city and 2 rivers flow through it, one of them, České údolí, dammed. The area the district sprawls over lies on the territory of an identically named village, but it was a separate district between 1970-1974. Since 1990, Pilsen 6 is an independent municipal district.

Pilsen 7 - Radčice

The rural Pilsen 7 district is located at the west of the city on the banks of the river Mže. Pilsen 7 borders Pilsen 9 and Pilsen 5, is home to no more than 1000 residents and is surrounded by a natural rock formation. It also includes a romantic castle which has been preserved from the early 20th century.

Pilsen 7 is part of the municipal area of Pilsen since 1976 and has been made an independent district in 1990. The area hs a strong agricultural character thanks to the river Mže and the fertile land which surrounds it. The north of the district contains a forest, located in the center of a restored village, with historical estates, and an industrial zone in the west.

Pilsen 8 - Černice

Pilsen 8 contains the preserved historical center of the city, built in the first half of the 15th century. The northwest of the district borders the right bank of the Úhlava river. The southeastern portion of the districtcontains woods with a mountain bike path which leads to the ruins of the Radyně Castle. The northern part of Pilsen 8 contains the Olympia mall which includes a cinema, a post office branch and many stores (such as the Kika brand furniture stoor) and a gas station.

Pilsen 9 - Malesice

The area lies on the northwestern side of the city, on an area previously occupied by a village with a castle in its center.

Pilsen 10 - Lhota

This district was founded in 2003 as a result of the linkage of the village of Lhota in the city of Pilsen. The area lies in the south-western edge of the city, sprawling over 96 acres. The area enjoys a real estate boom and the population growth within it is projected to continue.

For additional information on real estate purchase in Pilsen click here

The guide to purchasing real estate in the Czech Republic 

Israel's Ambassador in the Czech Republic, Daniel Meron, Praises the Friendship Between the Two Countries

posted 5 Oct 2018, 23:36 by Conbiz Info Center   [ updated 5 Oct 2018, 23:36 ]

Israel's Ambassador in the Czech Republic, Daniel Meron, Praises the Friendship Between the Two Countries 

The Czech Republic and Israel share nearly 30 years of Diplomatic Commercial and Tourism Relations. Furthermore, the State of Israel views the Czech Republic as one of its closest friends. Those were the words of the Israeli Ambassador in the Czech Republic, Daniel Meron, in an interview to the Czech Newspaper Prague Daily Monitor.

The President of the Czech Republic, Milos Zeman, will arrive in a state visit in Israel on November 2018, and ambassador Meron states in regard to this visit that: "We are looking forward to the visit because Zeman is a great friend of Israel." The ambassador claims that this is one of the most important visits the Czech Ambassador is expected to carry out in the first half of 2018. The president is expected to inaugurate a Czech House in Jerusalem as a preparatory step to moving the Czech embassy to Jerusalem from Tel Aviv.

The deep friendship between the two states began almost as soon as the velvet revolution took place. According to Ambassador Meron this ended the dark period which began during the Second World War in which the Jewish community in German occupied Bohemia and Moravia was almost completely exterminated by the Nazis (The Jewish community prior to the war was 90,000 strong. Only 10,000 Jews survived the war within Bohemia and Moravia). Immediately after the war there was a brief honeymoon between reborn Czechoslovakia and the Zionist Movement and the State of Israel – a honeymoon that was cut short by the Communist takeover in 1948.

The ambassador states that during the brief period between 1947 to 1948 (in which Benes served as the President of Czechoslovakia, and Masaryk as the Foreign Minister) Czechoslovakia supported the principle of a Jewish Homeland in the Land of Israel.

There are three fields in which Czechoslovakia helped Israel in its early years. The first was weapons and ammunitions including training. According to the ambassador "The first pilots in the Israeli Air Force, which today is apparently one of the best air forces in the world, were young men who were trained in Czechoslovakia, and some of them were Czechs." He claims that "This aid was essential for our victory in the war of independence, and we do not forget this."

The second field was political support in the establishment of the State of Israel, including voting in the UN in favor of the 1947 partition plan. Ambassador Meron claims that the third field has been forgotten by history – it is the aid Czechoslovakia provided to Jewish refugees. He notes that Poland was filled with Jewish refugees after the holocaust, and that Czechoslovakia enabled them to pass through its territory to Austria, and thence to Italy, where they embarked on ships to Israel or the United States.

Meron stated that: "When Václav Havel was elected President of Czechoslovakia in 1990, he stated that friendship with Israel was important. Moreover – he promised that the new Czechoslovakia would be extremely close to Israel and this has been the situation ever since. And if I may fast forward 30 years to the present, the Czech Republic has indeed become one of Israel's closest friends in Europe."

Jerusalem currently holds a square named after Václav Havel, and Israel is filled with sites named after Thomas Masaryk (The President of the first Czechoslovak Republic) – the man who had vigorously defended Jews and battled antisemitism since the days in which he was a student of law.

Commercial partnership 

The trade between the two countries is currently typified by the exchange of traditional industries from the Czech Republic with the products of digital industries from the State of Israel. Meron states: "We are one of the Czech Republic's best trading partners outside the EU block. In fact, the Czech exports to Israel rise yearly, primarily because the Škoda Automobile Company is so successful in Israel". This success has led Škoda to open up a new center in Tel Aviv and invest in many Israeli companies, particularly high tech and transportation. The ambassador expects this type of cooperation to continue and even to expand. In addition, Israel and the Czech Republic closely cooperate in hydrological issues.

For example, Ambassador Meron has met with the Czech Agriculture Ministry in order to examine possible solutions for the drought in the Czech Republic. According to the Ambassador: "We have made great achievements in turning the Israeli Deserts verdant. This has led some in the Czech Republic to enquire whether we would be willing to share our technologies and knowledge with them. That is why I believe that the water crisis can be a basis for future collaboration."

Tourism potential 

According to the ambassador, Prague is considered to be a central tourist attraction for Israeli tourists. Prague is renowned for its beauty, the friendliness of its residents and its Jewish history. Prague is in fact one of the most attractive tourism sites for Israelis in the entire world, and around 200,000 Israeli tourists flock to it every year. Nonetheless, the ambassador claims that most Israelis miss the attractions the Czech Republic holds outside of its capital.

The Ambassador himself has traveled across the Czech Republic over the two years in which he has served in the country and says: "I want to see Israelis get out of Prague and visit Český Krumlov, Kutná Hora, Brno, Karlovy Vary, and Pilzen". Meron believes that there is a great deal of potential growth in this type of tourism.

In addition, there are several Jewish sites outside of Prague. For example: around a 100 Czech villages in which Jewish communities existed until the 1930s. in most cases only the Jewish cemeteries in those villages survived. Various initiatives restore the Jewish culture in these villages such as:

  • Partial funding by the European Union has helped restore 10 synagogues throughout the Czech Republic.
  • The "ten star" program of Chabad which provides each synagogue with a different focus through which Jewish life may be interpreted and understood.

However, few Czech tourists reach Israel, and the ambassador states that only about 25,000 Czech tourists reach Israel every year. However, the hope is that this number will continue to grow. One of the opportunities to increase Czech to Israel tourism is Israel's hosting of the Eurovision contest in 2019.

The ambassador states that : "Anyone who travels to the Eurovision next year in Israel will enjoy himself big time. Israel has an incredible gastronomic scene, particularly for vegetarians and vegans. The state is very modern and yet simultaneously biblical, which many archaeological sites to explore, so that everyone can find what to love."

The ambassador praised the Czech performance and the contest and notes that "I particularly loved Mikolas Josef's song which was special and different." He did not understand why the Czech Republic did not win one of the first ten places to this day and he states that: "The Czech Nation is extremely musically talented, including in classical music and the opera."

Ambassador Meron knows that many people wonder at Israel's participation in the contest in spite of not being physically part of Europe but claims "We are European in our culture and association and we are an open society."

In addition he states: "The Arab countries surrounding us do not permit us to participate in various musical contests in the Middle East. Our music is also very Western, as is our culture and our values" He summarizes by stating: "We view ourselves as Europeans to all intents and purposes".

To read additional articles and learn additional interesting information – please click here

Does the Czech Republic have a real estate bubble?

posted 29 Sep 2018, 12:05 by Conbiz Info Center   [ updated 29 Sep 2018, 12:15 ]

Does the Czech Republic have a real estate bubble?

The current situation of the residential real estate market in the Czech Republic and Slovakia – what are the risks?

The excellent economic performance of the Czech economy has resulted in high demand for residential real estate assets and prices are accordingly on the rise. In contrast to Slovakia, where this trend is country wide, in the Czech Republic it is concentrated primarily in Prague. At this point, however, we cannot speak of a real estate bubble in these states because income is rising in tandem with real estate prices.

The Slovak economy is booming. Indeed, the latest GDP growth rate figures confirm this. The excellent conditions in the labor market have resulted in the lowest unemployment rate in Slovak history, pushing income rapidly upwards. Positive economic developments have resulted in high consumer trust, bringing about a rise in consumer spending. 

As a result, residential real estate prices in Slovakia have continuously risen since 2014. However, growth has been gradual, and real estate prices have only rarely registered double figure growth in the Czech Republic, by contrast, economic performance parameters are similar to those of Slovakia, at least in regard to domestic consumption – however, the real estate prices dynamics are very different.

There are a number of explanations for the differences between the states in the field of real estate. One is the relation between supply and demand. Prague, unlike Bratislava, is experiencing rapid demographic growth, and it is a more attractive target of international real estate investment. Another conspicuous difference is the location of the capital in regard to the dynamic of real estate prices. Prague is the vanguard of real estate prices in the Czech Republic, whereas the price dynamic in Slovakia is more evenly spread, with the capital not being so different from the rest of the country.

Is there evidence indicating the growth of a real estate bubble?

This is an important question which always arises in times of economic expansion. As we previously noted, the economies of both states are doing very well indeed. An additional fact which must be taken into account is the loose monetary policy in the Czech economy and in the Euro zone. Furthermore, the rising household income (both in the Czech Republic and in Slovakia) and the high rates of home ownership encourage real estate demand.

In order to determine whether there is or is not a real estate bubble, one should consider the OECD findings

The OECD report compares real estate prices to prices in other consumer fields. This data includes nominal real estate prices, as well as real prices. In other words, the real estate prices are calculated in relation to the price levels of other consumer products. These findings indicate that for both countries, the real estate prices are higher, as of 2011 – 2012, than those of long term consumer prices.

A similar trend can also be seen in the present (2018). In other words, the nominal real estate prices are rising at a similar rate to the rate of inflation of other consumer products. That is why investment in real estate is a relatively small item for households in both the Czech Republic and Slovakia. In addition, the households in both states enjoy significant benefits from the current situation – the rise in real estate prices is not significant compared to the rise in their income.

Furthermore, we used the OECD findings to compare the real estate prices between various Central European states. The ration between lease rates and income shows that the rise in the Czech Republic, Slovakia and Hungary is significant in relative terms as well. Still, the lease rates in Germany and Austria has consistently risen in spite of the financial crisis – which indicates a real estate bubble. Nonetheless, the ratio between real estate prices or lease rates in the Czech Republic and Slovakia remain far from the level registered prior to the financial crisis.

It is important to recall that rise in the ratio between lease rates and/or real estate prices to income is not indicative of a bubble. In fact, the comparison of the Czech Republic and Slovakia to two other real estate bubbles (Spain and Ireland) is proof of one thing – there are significant differences in the ratio of rent and the price of real estate relative to income prior to and post the economic crisis, so this is not a real estate bubble.

However, the identification of a real estate bubble is a difficult task and can usually only be done retroactively. In spite of this, our comparison did not identify any indication of a bubble in real estate prices, so that while prices in Slovakia and the Czech republic are indeed rising, they are not rising any swifter than the household income. In fact, the economic accessibility of apartments remains just as it was prior to the 2008 financial crisis. 

Do you want to hear more about real estate in Prague and the projected trends? Please contact us

This is why apartment prices in Prague will continue to rise over the years to come

posted 29 Sep 2018, 11:59 by Conbiz Info Center   [ updated 29 Sep 2018, 11:59 ]

This is why apartment prices in Prague will continue to rise over the years to come 

Those following our site know that in most cases our predictions turn out to be accurate. This is not because we have been blessed with the gift of prophecy, but primarily because of our excellent familiarity with the Czech market and our extensive experience of many years in the country.

Today, after several years of in which the real estate prices in Prague and its environment (10-15% on the average per year) have risen we wish to discuss the reasons for this trend, and especially about the chance they will continue. 

The bureaucracy is the primary culprit for the rising prices of residential real estate in Prague 

The Eurostat data shows a clear trend since the fourth quarter of 2015 of a rise in residential prices throughout Europe, so that the Czech residential real estate market is merely the vanguard of this trend. The real estate prices in the Czech Republic have registered the highest rises in Europe in 2017. The source of this data is the Financial Stability Report of the Central Czech Bank from June 2017. 

The Czech Economic Research Institute (CETA) published a study focusing on the residential real estate market in Prague. The study identified bureaucratic delays and high demand as the primary culprits for the housing shortage in Prague. As of now, there are plans for the construction of 40,000 additional residential units in Prague and the study found that any delay in the construction of 1000 units leads to a rise of 1.18% in real estate prices. 

In spite of the prevailing opinion, the increasing use of Airbnb apartments in Prague is not responsible for the price hikes. The research manager Aleš Rod has stated that "The influence of Airbnb is not as great as is commonly thought. In fact, the core of the rise in real estate prices is based on a combination of immigration into Prague, a small number of apartments being built, and macro-economic indicators of economic growth such as high wages, low interest and mortgages".

That is why the research manager sees a loosening of the requirements to acquire building permits the best manner to slow down the rise in real estate prices. He claims that Prague is the sixth richest area in Europe, so that the construction of new apartments is absolutely essential. He claims that there are two manners to stabilize the real estate market: efficient development of underutilized areas and rezoning agricultural areas for residential unit construction. Nonetheless, the study determines that such tools require investment in infrastructure in order to avoid the development of a real estate bubble. 

However, Aleš Rod also believes that in the near future no change is likely, so that the upcoming years remain a good opportunity for investment in Prague real estate. He has stated that "given the slow pace of municipal legislation in Prague, no significant change is expected prior to 2022, so that price rises are likely to be at the same level as in the previous two years."

Are you interested to hear more about real estate in Prague? Please contact us

Plzeň – an excellent site for investment in Czech real estate

posted 16 Sep 2018, 06:21 by Conbiz Info Center   [ updated 16 Sep 2018, 06:22 ]

Bottoms up! Plzeň – an excellent site for investment in Czech real estate 

The Plzeň (Pilsen) Province in the Czech Republic

The Plzeň Province borders Germany to the west and is famous thanks to the Plzeň beer manufactured in it. The province includes 7 regions : Domažlice, Klatovy ,Plzeň-město Plzeň-jih, Plzeň-sever, Rokycany, and the Tachov region.

The Plzeň province is renowned as the leading industrial zone in the Czech Republic, a role it fills thanks to the plentiful natural resources in the province, including clay and limestone from the quarries of the Šumava foothills. These natural resources have transformed Plzeň into a site for foreign investors, and many have established factories there.

The region also has a flourishing tourism industry. One of its chief destinations is the Barthomuleo Gothic Cathedral from the 13th century, which includes a 135 meter tall tower, the highest tower in all of the Czech Republic. An additional site are the historic tunnels in the Old City, which stretch underground for over 20 kilometers, one of the most extensive tunnel systems in all of Europe.

In 2015, Plzeň was selected as the cultural capital of Europe by the European Union. 

The city of Plzeň 

The city of Plzeň is the capital of the Plzeň province, and the hometown of the famous Pilsner beer. It is only an hour by car from Prague and is the fourth largest city in the Czech Republic.

The city holds the largest Beer Brewery in the Czech Republic (Pilsner Urquell) and the largest distillery in the country (Stock). Both are major attractions for tourists who visit, learn of their illustrious history and, of course, sample their products.

However, Plzeň is more than a mere provincial capital. It holds some of the best masterpieces of Gothic construction in Europe. Perhaps the best known example is the St. Bartholomew Cathedral, with the tallest Church Tower in Europe. An additional attraction is the Grand Synagogue of Plzeň , the third largest Synagogue in the world. 

Plzeň is also home to several fascinating museums, including the West Bohemian Museum (which holds the oldest collection of weapons in Central Europe) and the Brewery Museum.

The City of Plzeň holds most of the schools, businesses and factories of the province, and they are undergoing constant expansion. For example, there are plans to expand the famous Skoda factory in the city.

As of 2018, the University of West Bohemia, and particularly the Faculties of Law, Mechanical Engineering and Sciences holds some 20,000 students, who live in the dorms and residential neighborhoods of the city.

Real estate prices in Plzeň are about a third lower than Prague, and the return on investment on residential apartments in good neighborhoods range between 4 – 6%.

Are you interested to hear more about real estate investments in Plzeň ? Please contact us

Private home prices in the Czech Republic are on the rise

posted 1 Sep 2018, 23:31 by Conbiz Info Center   [ updated 1 Sep 2018, 23:32 ]

Private home prices in the Czech Republic are on the rise 

Many Czechs spend their weekends and vacations in village cottages and in vacation homes, which are considered an inseparable part of life in the Czech Republic. Nonetheless, those who seek relaxation from the din of the great cities must now invest far more efforts than was previously the case.

In fact, the rise in apartment and home prices in the Czech Republic has also spread into the private home market. According to the data of the CeMap Company, the prices of private homes rose by 20% over the past year. The highest rises were registered in the Vysočina and Zlín regions (a rise of 40%) and in the Liberec region (a rise of around 30%).

Experts believe that this rise derives from, among other things, the rise in real estate prices elsewhere in the Czech Republic. Residents who therefore cannot afford to purchase private homes elsewhere or apartments in the cities turn to these regions instead, driving up demand and therefore the price as well. In addition, in spite of changes to the mortgage regulations in the Czech Republic – the private homes still enjoy accessible mortgages provided that they be populated year round.

The highest number of private homes (cottages and vacation homes) in the Czech Republic can currently be found in Central bohemia, which reflects the fact that their owners are Prague residents that are not interested in vacationing far away from their homes in the weekends.

However, this proximity does not adversely affect the quality and most private homes in the Czech Republic are of the highest quality, requiring no renovation. The reason for this is simple – the Czechs do not want to work hard in their weekends in the village and just want to relax. 

Want to learn more about reak estate in Czechia? Click here

Changes in Czech Republic Mortgages 2018

posted 26 Aug 2018, 06:07 by Conbiz Info Center   [ updated 26 Aug 2018, 06:07 ]

Changes in Czech Republic Mortgages 2018

In early October 2018 new regulations will come into play in regard to mortgages in the Czech Republic. The Central Czech Bank published an official announcement that the purposes of these regulations is twofold: preventing the generation of a real estate bubble and preventing the development of future problems in the financial system that might be caused by the granting of mortgages that are higher than the ability of the mortgagees to repay.

Following the changes undertaken in April 2017, the Czech Banks are relying more and more on the LTV parameter – (A loan in accordance to the value of the real estate) and they are demanding that it be under 80%. In other words, that the bank will fund no more than 80% of the value of the real estate as it was assesed by a certified appraiser or the bank.

The Czech Banks still have the option of providing more than 80% mortgage, but these mortgages cannot be more than 15% of the bank's loans portfolio. What this means is that banks will be more careful when providing mortgages. Up to now, the remainder of the property value had to be provided from other resources they possess (mostly self-capital). The attempts to bypass this regulation with other loans (such as loans by other banks), will no longer be accepted by the Central Czech Bank and contradict the new regulation.

The new change

In practice, from now on two additional criteria will be considered during the handling of the mortgage application by the banks (In the event that this is a couple or business partners who apply for a mortgage, these values will be set by joint calculations, in other words values which take into account the repayment ability of the different applicants).

  • DTI (Debt relative to income) – this parameter considers the debt (Mortgage) relative to the yearly net account. The bar in this case is 9, so that the maximum allowable debt is the yearly income times 9.
  • DSTI (Mortgage debt relative to income) – this parameter calculates the monthly mortgage payment relative to the net income. The bar here is 45%, which means 55% of our income must remain in your hands after paying the monthly mortgage payments.
The Czech Republic is not a pioneer in these regulations and a similar integrated system also exists in Slovakia, Austria and the Netherlands. However, this system is usually not as widely used in the states of the European Union.

It is important to know that the new regulation is not mandatory but a recommendation

The new regulation is not mandatory, and no bank is obligated to follow it to the letter. They are, however, obligated to provide the authorities with an explanation in the event that they fail to implement it. As a result, the final decisions of the banks in regard to mortgages will be in the framework of a triple calculation. In other words, if the mortgage applicant does not meet the requirements of the DSTI, the bank will probably demand a low LTV value or else reject the application completely. In other words – if the mortgage is over 45% of the income, the bank will probably finance only a very low percentage of it, if at all.

What is the reason for the change in the regulations?

The Czech National Bank has derived lessons from the last crisis in 2008 and is interested in preventing future problems. While the Real Estate market is heating up in various parts of the Czech Republic, and particularly in Prague, the banks fear a domino effect in an extreme scenario where the economy freezes, the unemployment rate rises, or many real estate assets are put on sale. However, many experts claim that there is no cure for the heating up of the real estate market in recent years.

What are the implications for the real estate market?

One of the ramifications of this regulation is that certain clients, particularly those with low wages, will not be able to receive high percentage mortgage, or any.

According to Jan Frait, the department head of economic stability in the Czech Central Bank, only 7 - 8% of the mortgage applicants will not meet the demands. On the other hand, other experts claim that 25 – 33% of the clients will be affected by this regulation, primarily youth who are purchasing an apartment for the first time.

Jiří Kryl of the BrokerTrust Company estimates that as the new regulation will result in rising demand for more remote and less central, and therefore cheaper real estate assets, as Czech citizens will prioritize lower residential costs over better residential areas.

Another possibility is that Czech citizens will prefer to remain in a leased apartment for longer than usual, for example in order to save money to meet the criteria to receive a mortgage and purchase an apartment later on. The projection, therefore, is that the cost of leases will rise.

Some see this as an opportunity for foreign investors that will be able to reach the new standard of mortgage criteria over local Czech that has lower salaries.

It is hard to predict which sites will enjoy a rise in demand, but these will most likely be small apartments in the center of the big cities such as Prague, or else small and medium apartments in common.

Will this regulation make it harder for foreign investors to receive a mortgage?

Probably not, because foreign investors must already meet strict criteria to receive a mortgage. Most investors who are not resident of the Czech Republic or Czech Citizens can not receive a mortgage of over 60% as of today, so they already meet the requirements of the new regulations.

As aforementioned, most foreign investors purchase real estate in the Czech Republic for investment purposes. They also meet the required income criteria, that is the size of the mortgage relative to their yearly net income, and the monthly mortgage payment relative to their net monthly income.

What will be the impact of all this on the mortgage market?

It is hard to say but the following scenario seems most likely: since the overall sum of the mortgages has dropped (some of the clients will not meet the conditions to receive a mortgage and others will take lower mortgages). The expectation is that a customer who receives a mortgage will be considered an important client by the banks and they will seek to keep him – accordingly the competition, via more attractive mortgage conditions, will grow fiercer.

Interests on Mortgages

Since the Czech National Bank (CNB) has proportionately increased the interest rates as well, the possibility that mortgage rates will also moderately increase in the future cannot be discounted. In fact, the Fincentrum Hypoindex (The average periodical interest for common mortgage types) has consistently grown since January 2017, even though only at a relatively low rate. Still, even after the Czech National Bank announced a hike in interest rates on June 2018, the two largest banks in the Czech Republic (Česká Spořitelna and Komerční banka) announced surprisingly that they were reducing the basic mortgage rate by 0.2% so that surprises are certainly possible in this respect as well.

Do you want to hear more about Real Estate in the Czech Republic? Set up a meeting with us.


Prague has the highest number of businesses in the world that accept virtual coins

posted 12 Aug 2018, 08:45 by Conbiz Info Center   [ updated 12 Aug 2018, 08:45 ]

Prague has the highest number of businesses in the world that accept virtual coins 

An analysis by the economic magazine Forbes based on the Coinmap data results in an unambiguous conclusion – Prague is the leading city in the world in the Bitcoin field. Prague has the highest number of businesses that accept Bitcoin payment (147 places). Prague is followed by the following 9 cities: Buenos Aires, San Francisco, Madrid, New York, Amsterdam, Bogota, Vancouver, London and Paris.

The ranking is based on the number of businesses that received Bitcoin payment and does not take into account the size of the population. In fact, Europe and North/South America dominated the Forbes list at the expense of Africa, Asia and Australia thanks to limitations on the use of this coin in a number of states such as China, the Gulf States and more. Tel Aviv on the other hand had high intensity Crypto scene.

This may sound like science fiction, but there are already people using the Bitcoin map, such as the "Crypto Nomads" – people who wander from place to place utilizing only the bitcoin. Forbes mentioned that at least one such nomad spent the entire summer of 2017 in Prague primarily due to the ease of Bitcoin use in the city.

The bitcoin is considered to be a popular coin in states in which no stable coin exists. For example, Venezuela is the site of 8% of all bitcoin transactions in the world, in spite of holding a population of only 31.57 million people – less than half a percent of the world population.

However in the Czech Republic in general, and in Prague in particular, the trend is opposite. For example, there is usually a considerable gap in the use of Bitcoin between rural and urban regions, but in the Northern Czech town of Zatec (with a population of only 20,000) there are over 50 businesses that only accept payment in Bitcoin. Another, country, by the way, that goes against this trend is the Netherlands.

Prague is also the home of bitcoin café, the only café in the world to accept payment solely in bitcoin and not via other payment methods. In the same building are also the chief officers of Paralelní Polis – a center for the promotion of alternate currency payments that organizes worldwide conferences in the topic.

The city is also the home of SatoshiLabs, a company in which both specialists and hobbyists in the field of virtual coins operate. The company has been a pioneer of several fields in Bitcoin technology and has developed various associated software. So has the General Bytes Company, which deals in the field of cryptology and is considered to be the second largest company in the world, with its headquarters in Prague.

More about business in Prague.

The Czech labor market continues to thrive, and the number of available positions is at an all-time high

posted 12 Aug 2018, 08:38 by Conbiz Info Center   [ updated 12 Aug 2018, 08:39 ]

The Czech labor market continues to thrive, and the number of available positions is at an all-time high 

While it is true that the unemployment rate in the Czech Republic has slightly risen in July due to seasonal fluctuations, the labor market is still thriving, and the number of available positions is at an historical all time high.

This rise derives from various seasonal factors that recur every year, such as low recruitment during the holiday season in early July, entry into the market of university graduates, and more. As expected, in July the unemployment rate in the Czech Republic rises (see attached figure) as it did this year. In July 2018 the unemployment rate in the Czech Republic rose from 2.9% to 3.1%. Even so, this is a very satisfactory unemployment rate. By the way, the unemployment rate in Prague itself is near zero (!).

The number of available positions in the Czech Republic has reached an all time high

In spite of the rise in the unemployment rate, the number of available positions is at an all-time high – 310,000 jobs. In comparison to the same period in the previous year, this represents an addition of around 122,000 job, in other words 71,500 fewer unemployed – a decline of 23.6%. what this means is that since April 2018, the number of available jobs in the Czech Republic has outstripped the number of job seekers.

Another happy fact is that the long term unemployment in the Czech Republic is constantly declining. For example, the number of jobseeker who are unemployed for over 5 months has declined by 32.6%, in other words 57,600 people less than in the equivalent period in the previous year.

And what does the future hold?

The number of unemployed in the Czech Republic is the lowest in Europe, for several reasons. In any event, the unemployment rate has reached such low levels that it is projected to decline more slowly than in the past.

Thinking of working in the Czech Republic? This is for you

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