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Everything you need to know is included in our Czechia Property Pack
Are you thinking of investing in property in the heart of Europe? Are you wondering whether now is the right time to make a move?
People have different views on market timing. Your Czech friend may suggest that it's currently a good time to buy property, but your colleague residing in Prague might advise waiting for better opportunities.
At Investropa, when we create articles or update our pack of documents related to the real estate market in Czechia, we base our analyses on factual data and statistics rather than opinions, minimizing biases and uncertainties.
We have carefully studied official reports and statistics from government websites, and we now have a trustworthy database with important information. Here's what we discovered, which can help you decide if it's a good idea to purchase real estate in Czechia.
We hope you find this article helpful!
How is the property market in Czechia currently?
The Czech Republic offers, today, a lot of stability to investors
Positive
If you want to invest in real estate, prioritize stability as it minimizes legal, regulatory, and political risks. It is an information you need as a foreigner looking to buy a property in Czechia.
You probably know it already, Czechia is very stable. The last Fragile State Index reported for this country is 39.9, which is an outstanding number.
The Czech Republic has a strong and stable economy, backed by a reliable infrastructure and a well-educated workforce. Additionally, the country has a favourable tax system and a business-friendly environment, which makes it an attractive destination for foreign investors.
Next, let's assess the economic projections.
The Czech Republic is positioned for growth in the coming years
Positive
Before diving into real estate investment, the initial step is to look into the country's economic condition.
As indicated by IMF projections, Czechia is likely to finish 2023 with a growth rate of -0.5%, which is sad to see. Regarding 2024, the consensus estimate is 2%.
The Czech economy is expected to face challenges in achieving growth due to high prices and limited access to financing within the country. Moreover, the inflation rate is projected to stay around 12% throughout 2023. These factors make it difficult for businesses and individuals to afford goods and services, leading to reduced spending and slower economic expansion.
However, the negative growth rates are not here to stay since Czechia's economy is expected to increase by 9% during the next 5 years, resulting in an average GDP growth rate of 1.8%.
Projected moderate growth in the Czech Republic indicates a stable and reliable economy, making it an attractive option for property investment. This growth rate also suggests that there is potential for future increases in property values.
Nonetheless, there are other indicators to watch.
Czech business owners are not as optimistic as they used to be
Negative
Although the GDP forecast provides insights, it may not fully capture the local sentiment in the Czech Republic as it relies on external projections. Fortunately, in The Czech Republic there exists an official metric that is consistently published. This doesn't apply to every country, so we're in luck.
The metric known as the Business Consumer Index (BCI) is obtained by evaluating business leaders' confidence in the present and future economic conditions through surveys and assessments.
According to the Czech Statistical Office's data, the latest Business Confidence Index value is 7 for The Czech Republic. This is a neutral score
If we analyze the data more thoroughly, we note an unfavorable signal: the score has declined. Back then, one year ago, it was at 20.
The current score doesn't provide substantial information as it appears to be average. Also, it's important to know that this score has been declining globally. To determine whether it's the opportune moment to invest in property in the Czech Republic, we need to analyze additional data.
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The Czech Republic is dispensing less building permits
Neutral
When considering whether to buy property in a country, it's worth taking note of the number of construction permits issued. More building permits being delivered indicates a growing confidence in the property market.
Unfortunately, the number of building permits issued is declining in The Czech Republic.
Over the course of the past year, according to Czech Statistical Office, the number of building permits issued by the Czech Republic municipalities fell by 3%, from 92,838 to 90,020 units.
Without a doubt, this is a discouraging signal. Let's analyze more data.
But before that, keep in mind that if there is a reduction in building permits, it will result in a diminished supply of real estate. Consequently, there is a higher chance of property prices increasing in Czechia in 2024.
Czech Republic's property prices skyrocket with accelerated growth
Positive
The Czech Republic's home prices have increased by 75.4% in 5 years according to eurostat.
It means that if you had bought an attic apartment in Prague for $650,000 five years ago, then it would now be worth around $1,140,000.
Currently, property prices continue to surge with a persistent and rapid growth trajectory.
Definitely, it's a good signal and positive signs abound for property buyers in the Czech Republic, as the vibrant market displays a growing momentum. Does it make a good time to buy though? Maybe. Also, it's worth noting that waiting for a market correction could lead to a more favorable investment price.
You can find a more detailed analysis of the real estate prices in our property pack for Czechia.
Everything you need to know is included in our Czechia Property Pack
The Czech Republic's population is getting (a bit) richer
Positive
When you're looking to buy real estate, population growth and GDP per capita deserve careful consideration because:
- a growing population means more people needing homes
- a higher GDP per person means people have more money to spend on housing (which can lead to increased property value over time)
In Czechia, the average GDP per capita has changed by 4.3% over the last 5 years. It's not much, but the growth is here.
This means that, if you purchase a historic apartment in Prague and rent it out, you will find that each year, you'll attract more tenants with sufficient funds to cover the rent.
If you're considering purchasing and renting it out, this trend is a good thing. Then, the rental demand might increase in cities like Prague, Brno, or Ostrava in the Czech Republic in 2024.
Rental yields are average in Czechia
Neutral
Rental yield is a widely known indicator in real estate investing.
It's the annual rental income of a property divided by its price. For example, if a property in the Czech Republic is purchased for 5,000,000 CZK and generates 240,000 CZK in annual rental income, the rental yield would be 4.8%.
According to Numbeo, rental properties in Czechia offer gross rental yields ranging from 1.6% and 4.3%. You can find a more detailed analysis (by property and areas) in our pack of documents related to the real estate market in Czechia.
It means that your income potential is relatively moderate.
As previously observed, the supply of real estate will remain constant, indicating that property prices are unlikely to change. However, there might be a slight growth in the number of affluent tenants. Consequently, rental yields might increase in Czechia in 2024.
Everything you need to know is included in our Czechia Property Pack
In Czechia, inflation will intensify
Positive
Simply put, inflation is the gradual rise in the cost of goods and services.
It's when your usual pint of Czech beer in Prague costs 50 Czech korunas instead of 45 Czech korunas a couple of years ago.
If you're contemplating investing in a property, high inflation can offer several advantages:
- Property values have a tendency to increase over time, potentially leading to capital appreciation.
- Inflation can result in higher rental rates, thereby increasing the cash flow from the property.
- Inflation reduces the real value of debt, making mortgage payments more affordable.
- Real estate can act as a hedge against inflation, effectively preserving the value of the investment.
- Diversifying into real estate provides stability during inflationary periods.
In accordance with IMF projections, the inflation rate in Czechia will increase by 19.1% over the next 5 years, with an average annual increase of 3.8%.
This data is suggesting that Czechia could experience inflation, resulting in rising prices. Therefore, it's worth considering buying property now as a potential opportunity.
Is it a good time to buy real estate in Czechia then?
Let's wrap things up!
2024 presents a compelling opportunity for property investment in Czechia due to several favorable signals that indicate a positive investment environment. The country's robust stability provides a secure foundation for investors, minimizing potential risks associated with economic and political volatility. This stability enhances investor confidence and assures the long-term value of real estate investments.
Czechia's positioning for future growth enhances its attractiveness for property buyers. The nation's strategic economic initiatives and its central location in Europe make it a potential hub for business and tourism. As the country continues to foster economic expansion, the demand for properties may increase, potentially leading to capital appreciation and long-term returns on investments.
One of the standout favorable signals is the accelerated growth of property prices in Czechia. This price growth trend suggests a strong demand for real estate, indicating a thriving market. As property values increase, investors have the potential to benefit from capital gains, making 2024 an opportune time for entering the Czech property market.
The improving wealth of Czechia's population further contributes to the positive investment climate. Rising incomes can translate into greater demand for housing, both for personal use and rental purposes. This increased demand for properties can create opportunities for rental income and potential appreciation of property values.
While inflation is anticipated to intensify, the neutral signals, such as dispensing fewer building permits and having average rental yields, are factors that can be balanced against the overall positive aspects of the Czech property market. Additionally, though Czech business owners' optimism has dipped, the robust stability and growth potential of the country can potentially offset this negative signal.
In conclusion, the stability, growth prospects, property price acceleration, and improving population wealth make 2024 a favorable year to consider property investment in Czechia. Despite some neutral and negative signals, the overall investment landscape seems promising, positioning Czechia as an attractive destination for individuals seeking to invest in real estate.
We sincerely hope this article has been helpful!. If you need to know more, you can check our our pack of documents related to the real estate market in Czechia.
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This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.
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