The value of apartments in Prague has risen on the average by 68% in the past five years

Post date: Apr 05, 2018 6:38:32 AM

The value of apartments in Prague has risen on the average by 68% in the past five years 

Purchasing an apartment for investment purposes in Prague is turning out to be a very wise investment indeed. Apartment owners in Prague have profited more than investors in the European securities or gold exchange. According to the data of the real estate company Central Group, an investment of one million Czech Korunas in an apartment in Prague has provided a return on the investment of 68% over the past five years. In fact, only real estate investment in London over these years has even approached the return of investment on apartments in Prague – a rise of 63.8% over 5 years.

The only investment to provide a higher return than investment in Prague Real Estate was the S&P 500 index (In the New York City Stock Exchange) – a return on investment of 113% over five years. The EuroStoxx50 and the Liv-Ex Fine Wine 100 have also provided a fine return on investment of 47.2% and 30.4%, but this is still significantly lower than the return on investment in Prague real estate.

Investment in cryptocurrencies has also derived a fine return since 2012, but such investments have experienced considerable fluctuations and may well fall in value as regulation of cryptocurrencies spreads. For example, on December 2012, a single bitcoin was worth 13$ whereas at the end of 2017 it was worth 17,900$. However, by the beginning of 2018, the bitcoin was valued at only 11,134$.

Unlike the bitcoin, investment in traditional currencies turned out to be non-remunerative. For example, the American Dollar rose in value over the past 5 years by 8.2%, whereas the Euro declined in value by 0.3% in comparison to the Czech Koruna. Nor did investment in oil turn out to be a good choice – investors experienced losses of 40%.

Investment in real estate in Prague did not experience any of the fluctuations associated with other types of investments such as investment in gold or stocks. It is true that investment in the PX50 index in the Prague stock exchange resulted in a return of 17% over 5 years, but it also experienced very high fluctuations. Gold also experienced high fluctuations in value, losing 12% of its value during this period. 

"It is apparent that investment in an apartment in Prague is a very stable investment in comparison to other types of investments" says Michaela Tomskova, the CEO of the Central Group, and adds: "Unlike the stock or commodity indexes, investment in Prague real estate has not experienced any fluctuations and is therefore considered a particularly safe investment."

It is true that the rate of the rise in apartment prices in Prague is expected to be moderated given the decline in the availability of apartment prices, but price rises are still projected over the next years. Investors on their parts prefer small apartments (kk+1 and kk+2) because they are more easily rented out. 

According to the data of the Central Group Company, around 20-25% of the apartments sold in Prague are for investment purposes, both to derive a steady income from apartment leasing and for future profits from rises in the apartment value. Experts estimate that inflation has pushed people to seek investments with a high return, whereas economic growth in the Czech Republic has provided people with more money to invest. 

The data of the Central Group is that there is a considerable difference between the prices of new and old apartments in Prague. This difference can reach 15%. Furthermore, since October 2016, the purchase of second hand apartments is subject to a 4% purchasing tax on the buyer. Central Group furthermore recommends that the energetic efficiency (For example, heating costs) of any asset be taken into account in the calculation of long term expenses, because new real estate properties are generally built according to greener standards. 

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