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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 the Czech Republic, 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 37.7, which is an outstanding number.
The Czech Republic offers stability to investors due to its robust economic framework characterized by a strong industrial base, particularly in automotive and manufacturing sectors, and its strategic location in Central Europe, which facilitates trade and investment within the European Union. Additionally, the country benefits from a stable political environment with a transparent legal system, which supports business operations and investment security.
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 2024 with a growth rate of 0.7%, which is somewhat disappointing. As for 2025, the consensus estimate is 2%.
However, this low number is just for the short-term, as Czechia's economy is expected to increase by 8.2% during the next 5 years, resulting in an average GDP growth rate of 1.6%.
A moderate growth rate in the Czech Republic suggests a stable and predictable economic environment, which reduces the risk of sudden market fluctuations for property investors. Additionally, steady growth often leads to gradual increases in property values, providing a reliable return on investment over time.
Nonetheless, there are other indicators to watch.
Czech business owners have a more favorable view of the economy
Positive
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 8 for The Czech Republic. This is a neutral score
That's really encouraging and the trend is upward: the BCI score, 12 months ago, was at 0.
The current Business Confidence Index is at a moderate level, which doesn't offer significant insights on its own. Additionally, it's noteworthy that this index has been declining on a global scale. To assess whether now is the right time to invest in property in the Czech Republic, further data analysis is necessary.
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 2025.
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 the Czech Republic.
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 2025.
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 the Czech Republic.
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 2025.
Everything you need to know is included in our Czechia Property Pack
In Czechia, inflation is projected to remain minimal
Neutral
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 1.0% over the next 5 years, with an average annual increase of 0.2%.
This data is suggesting that Czechia is expected to have near-zero inflation then. Unfortunately, buying a property now may not lead to significant price increases or high profits in the future.
Is it a good time to buy real estate in Czechia then?
Let's wrap things up!
2025 is shaping up to be an excellent time to invest in property in Czechia, thanks to the country's current stability and promising economic outlook. The Czech Republic is known for its stable environment, which is a significant draw for investors looking for a safe place to put their money. With the economy expected to grow by 8.2% over the next five years, this stability is likely to continue, offering a solid foundation for property investments. This growth translates to an average GDP increase of 1.6% per year, which is a healthy sign of a steadily improving economy.
A moderate growth rate like this suggests that the Czech Republic will maintain a stable and predictable economic environment. This is great news for property investors, as it reduces the risk of sudden market fluctuations that can negatively impact property values. Instead, investors can expect a gradual increase in property values, which means a reliable return on investment over time. This kind of steady growth is ideal for those looking to invest in real estate, as it provides a sense of security and predictability.
Another factor making 2025 a good time to buy property in Czechia is the limited number of building permits being issued. With fewer new properties being built, the demand for existing properties is likely to increase, driving up property prices. This accelerated growth in property prices can lead to significant capital gains for investors who buy now. Additionally, as the population becomes slightly wealthier, there will be more people looking to buy or rent properties, further boosting demand and property values.
Rental properties in Czechia also offer attractive returns, with gross rental yields ranging from 1.6% to 4.3%, according to Numbeo. This makes investing in rental properties a viable option for those looking to generate income from their investments. Moreover, with inflation projected to remain minimal, the purchasing power of rental income is likely to stay strong, ensuring that investors can enjoy consistent returns. All these factors combined make 2025 a promising year for property investment in Czechia.
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 the Czech Republic.
-Will real estate prices go up in the Czech Republic?
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.