The withdrawal of Britain from the European Union and its impact on the Czech Republic economy and real estate market

The Czech Republic is a relatively new member of the European Union. Furthermore, the Czech Republic possess one of the most robust economies in Europe insofar as economic stability is concerned. In fact, many of the European Union economists assess it as the most stable economy in the European Union after Germany. Therefore, understanding how Brexit is projected to impact the economy and real estate market in the Czech Republic it is extremely interesting. Is a positive effect projected? Do the experts project, rather, a negative impact? Projections in both directions exist, including the possibility of major instability in the economic situation of the state should the Czech Republic also choose to withdraw from the European Union.

A strong and stable economy

Quite a few investors, including foreign investors, Israeli investors included, have shown interest over the past years in investing in European real estate. Alongside Spain in general and Barcelona in particular, the Czech Republic constitutes an attractive target for investors, primarily due to the strong and stable economy it has managed to create. Since the Czech Republic joined the European Union in 2004, a little over a decade ago, its treasury ministers and senior economists led the country forward in every economic parameter. In order to understand the effect of the British withdrawal from the European Union (Brexit), one must first familiarize oneself with the state of the economy as of today.

A positive trade balance

Since the Czech Republic joined the European Union, investments totaling over Twenty Billion Euros have been made by other European Union members in the Czech Republic’s economy. Alongside public investments, an ongoing rise in the Gross National Product has also been registered, reaching new heights in 2016. The unemployment levels in the Czech Republic are very low and the housing prices remain good- and low, with a stability accompanied by a moderate rise which is highly attractive to investors. According to the latest publications, as is reflected in the finance site focus-economics the population of the Czech Republic, some ten million souls, produces a Gross National Product per Capita pf some 15,500 Euro (as of 2015). The Gross National product is around 164 Billion Euro. Economists estimate that the current GDP growth rate ranges between 2-4 percent annually. The unemployment levels are relatively low, under seven percent. Export, according to the 2015 data, reaches some 118 Euros annually, while imports are lower- around 111 billion Euroos. This is a positive trade balance, a parameter indicative of the strength of the local economy.

Insofar as the Czech real estate market is concerned, the residential housing market continues to show positive indications, with the average real estate asset prices continuing to rise over the past three quarters. Over the past year the real estate prices rose by around five percent. According to the data of the Czech Republic National Bank, the prices of new apartments have also risen over the past few months, but at a more moderate rate of around 3 percent. The question is- how will the British withdrawal from the European union affect the Czech Republic’s economy generally, and the Czech Republic’s real estate market in particular? Will attractive opportunities for investment in Czech Republic real estate remain for foreign investors?

In or out?

According to publication in the local press, as well as in British newspapers, the withdrawal of Britain from the European Union has led to a rise in calls for a similar step in the Czech Republic. Many assume that such a withdrawal, hastily called Czexit by some, will be the next in line following the British step. Should such a development occur, what are the projections for the local economy? Much like Cassandras in Britain who opposed the Withdrawal, many here also foresee an unsuccessful future for the economy. Nonetheless, as events are indicating, there are already economists who see the British withdrawal from the European Union as an Economic key for positive change. Is Britain projected to lose its positive growth momentum and economic might overnight? Probably not. The Czech Republic, which has shown over the past few years’ economic and political wisdom, will also likely prove capable of adjusting to the new reality without losing its own positive growth momentum.

It is important to remember one other thing- in the near future, following the British withdrawal from the European Union, the remaining states of the European Union are project to do all that they can to strengthen one another and improve the already tight trade relation. The Czech Republic, with an export oriented market and a trade surplus is projected to profit from this and also from the fact that the other states of the European Union will wish to retain the Czech Republic within the Union, rather than losing it, as occurred with Britain.

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