Time to Czech out Prague
Wednesday, 20th July 2005
ALAN Burdett landed in Prague on his first visit a few years ago as an investor, on the look-out for opportunities. After a few days in the city looking at properties and talking to people about the housing market he left, convinced that his hunch had been right.
But something else had also happened. Alan was bowled over by the city itself.
“Prague is a fabulous place, with lively, friendly people. I go back there as often as I can,” he says.
He now runs Prague Property Investments Ltd, a Liverpool-based company which has since sold hundreds of flats and apartments in the city, mainly concentrating on new-build properties which people have the chance to buy off-plan, plus some conversions.
Alan says: “Many of the homes we have sold are being used as holiday or second homes, although the majority are being bought by people who see the investment potential of Prague. There is a high demand for good quality properties and excellent prospects for capital growth.”
The charms of Prague with its medieval centre jam-packed with cobbled lanes, ancient courtyards, passageways and churches, plus an ancient castle which dates back more than 1,000 years, are now widely known.
But the city is anything but a museum piece. It has a very lively – and young – social scene. Old-fashioned pubs have been joined by a host of trendy bars and restaurants, making for a vibrant nightlife.
But does its undoubted popularity with tourists mean that Alan and other property developers are right – and that canny Mancunians would be wise to take a look?
It has a chequered history. Czechoslovakia became an independent nation in 1918 and Prague became its first capital. It was later occupied by Nazi Germany in 1939. Liberation Day is celebrated on May 8. After the war, communist rule held sway for many years, ending after the fall of Berlin Wall.
Czech and Slovakian separatist movements subsequently inspired a smooth split in 1993 into the Czech and Slovak Republics.
Importantly for property buyers, the Czech Republic, which borders Germany to the west, Poland to the north and Austria and Hungary to the south, is now a member state of the EU and the currency, the Czech Crown, may give way to the Euro in a couple of years.
Prague’s population is just short of one and quarter million people. The city is made up of five districts – historical towns in their own right – including a gothic Old Town and the “Little Quarter”, which dates from the 13th century. New Town” has only been around since the 14th century!
Within these districts, all linked by the landmark Charles Bridge, lie most of the city’s attractions which means it’s a city you can comfortably walk around, although the public transport system is excellent.
Beyond the city centre lie many modern districts – and this is where new developments are springing up, all at tempting prices.
Alan says: “Accession to the EU alone can’t be relied upon by itself to stimulate growth, but in Prague’s case, this is coupled with a strong economy.
“The developing domestic mortgage market matched to competitive interest rates make Prague in particular in the Czech Republic, an investment hotspot. We anticipate excellent capital appreciation on most housing stock.”
Prague is attracting an increasing amount of business investment with multi-national corporations taking advantage of a multi-lingual workforce, low inflation, low interest rates and the overall economic stability.
Prague has undoubtably become an attractive opportunity for property investors and enjoys one of the most vigorous residential housing markets on the continent.
There is a high and increasing demand for quality new build accommodation with the cost of residential property around a third that of other major European capital cities.
Jakub Kotan, managing partner of property agents KotanGuard, says: “British investors discovered Prague relatively late in comparison to other property hunters in western Europe.
However, they are making up for this now. Most investors tend to choose modern one or two-bedroom apartments with a good buy to let potential, although many also use the properties as first or second homes.”
When it comes to prices, Jakub says that around £35,000 will buy you a modern studio close to the centre of Prague, while a budget of £70,000 will stretch to a modern one-bedroom flat in a similar location.
Around £100,000 will see you the proud owner of a two or three bedroom apartment while £130,000 puts you in reach of a riverside luxury penthouse or mansion in the surrounding countryside.
“The Czech Republic as a whole has grown by about 13 per cent a year in the past three years,” says Jakub. And he predicts that growth will continue for several years.
“Prague is a stable, safe environment with plenty of activity. The introduction of the Euro in about three year’s time should also spark further price rises.”
A word of warning though – only people with a high tolerance level for form-filling should consider buying property in Prague.
Currently, non-resident foreign investors must form a limited liability company. This usually take around six to eight weeks to set up.
The good news, however, is that this legal requirement is likely to change and, on the plus side, ownership by a company allows savings on VAT and stamp duty.
Prague is also an accessible destination from the northwest. BMI Baby and Czech Airlines both operate scheduled services – with a flight time of around one hour 45 minutes- from Manchester to Ruzyne airport which is a 20 minute drive from Prague city centre.
In addition, Jet2.Com, flying from Leeds- Bradford airport, is also worth checking out.