The recent downturn in property prices has caused even many property aficionados to question whether real estate is the best investment choice.

In a following article we will discuss the disadvantages of investing in real estate because, yes, there are some, but for this article let’s look at the top two reasons where it beats alternatives.

Click here for the full article on PragueConnect.cz

Nathan Brown www.czechpoint101.com

Interested in Investing in the Czech Market? Have a property in Czech Republic? Click here to ask Nathan a question on Czech Property.

Information from the Czech Statistical Office (in Czech: Český statistický úřad or ČSÚ) showed that the list prices fell through 2011.

In the graph below the blue ‘ČR -nabídkové ceny’ line shows the listed prices and the yellow ‘ČR -realizované ceny’ shows the actual sale prices.

According to this information the actual sale price decline started in Q3 2008 which puts us, most likely, in the 4th year of price declines (if the actual sale data for 2011 will also show a price decline).

Czech property prices from 2005 to 2011 - list vs sale prices.

Nathan Brown www.czechpoint101.com

Interested in Investing in the Czech Market? Have a property in Czech Republic? Click here to ask Nathan a question on Czech Property.

News from Czech Republic

The last month has brought a flurry of positive economic news that will have positive results for the property market in Czech Republic. Probably the most positive news was that GDP jumped to 3% year-over-year in Q3, the fastest pace in nine quarters. It was a result which exceeded even extremely bullish forecasts.

Related with this has been news regarding the increased demand and occupancy in the commercial real estate market, with some forecasting shortages by the end of 2011.

In fact, we are already hearing of property prices increasing in different parts of the country in Q3 2010 but especially in Ostrava, the third largest city in Czech Republic.

To read all these news reports and more go to our blog: click here and subscribe.

News from CZECH POINT 101

As a company, we have worked hard for our clients over the last month at a time of year when occupancy typically starts to fall. I am proud to say that our occupancy has held very high with it currently steady at 94.5% across our three offices in Prague, Brno and Ostrava.

We have branched into new avenues of advertising such as on Facebook (here) and also attribute much of the success to our regular tenant draw, where we reward tenants for paying their rent on time. See our latest draw on YouTube here

In other news, we are proud to announce a fantastic investment possibility in Ostrava with 5.8% gross rental yields and 5% back from the seller. The opportunity is so exciting and, personally, I think the timing is so good, that my wife and I are purchasing one unit ourselves! Have a look at the details on our website: here

Special Offer – Accounting

Recently when we received the previous year’s tax filing from a new accounting client we found that the previous firm who had filed taxes (in fact, a major property management company focusing on foreign clients) had not claimed valid expenses such as depreciation and utility expenses. We were shocked! Whether it was a careless oversight or not this type of error can end up costing an investor thousands of CZK either immediately or when the property is sold. At a time in history when every investor is trying to maximize profits or struggling to break even, attention to details counts!

CZECH POINT 101 at this time is making a special offer to all Property Secret readers of a 20% discount on our regular accounting rates (please see our offer here) if they registered with us by December 31st, 2010. This would apply only to new clients and for the tax year of 2010.

Register now to have experts on investment property in Czech Republic file your tax return for 2010 by emailing 2010taxoffer@czechpoint101.com

www.czechpoint101.com

The results of the election held the end of May has been viewed as very positive for businesses.

Taxes should be stable for businesses and we don’t see any big changes to the tax structure on the Czech side which should seriously affect investors and property investment.

We expect that property taxes will increase slightly but are currently at such a low level that any increase will not greatly affect cash flow on a rental property.

Although we’ve had a weak spell with rental demand in Brno our offices in both Prague and Ostrava have done extremely well with keeping occupancy high.

We are currently going through the most common questions asked by our clients and what the answers are. For example: what are the typical selling costs in Czech Republic? Or Are Czech real estate agents accredited? These and more can be viewed on our blog: http://www.czechpoint101.com/newsletter/ and will continue to be shared over the coming weeks.

For any who own property in Czech Republic and want to get an idea about the current value of their property or what it would rent for, we encourage them to download our Property Valuation form, fill it in and email it to the appropriate office for a free valuation. This is available either for current rental or sale prices.

Nathan Brown www.czechpoint101.com

With many owners thinking of reselling at this point, one of the most common questions we get asked recently is about what the selling costs are in Czech Republic. Here are a list of them which may or may not apply to your property.

1. Real estate commission or fee

Typically from 3 to 5% of the purchase price (get a flat fee by using our unique Power of Attorney sale service)

2. Real estate transfer tax

3% of the sale price or valuation price (based on a valuation by someone authorized by the State) whichever of the two is higher. This is paid by the seller to the State.

3. Cost of the valuation for real estate transfer tax

Typically from 3,500 to 7,500 CZK + VAT per flat.

4. Redemption cost of the mortgage

If you don’t pay your mortgage out at the time of fixation there are typically heavy penalties from the banks. The penalties range from 10% to 25% of the remaining unpaid amount of the mortgage at the time of making a payment.

5. Final tax accounting and filing

If you have collected rent in the year in which you sold the property or made a net profit on the sale, you will be required to file a tax return to the local Financial Office. This can cost from 7,500 to 15,000 CZK + VAT.

6. Income or corporate taxes on net profit

If the owner of the property was a Czech SRO the company will need to pay corporate tax (in 2010 this is 19%) on any net profit. This includes on capital gains of the property or rental income.

If subsequent payment to the owner(s) exceeds any shareholder loans this additional amount would be subject to a 15% dividend tax.

An individual who has not held the property for at least 5 years (the time at which an investment property becomes capital gains free) will have to pay income tax (in 2010 this is roughly 15%) on the net profit whether from rental or capital gains.

7. Possible additional costs

It is advisable to have an attorney review the sale contract as the real estate agencies often don’t protect the interests of the client but are just interested in securing their commission.

There can be additional costs based on whether you would be physically present for the concluding items such as signing of the sale contract, turn-over of the apartment, transfer of utilities, etc.

If the property was owned by an SRO there can be the additional costs of liquidating the company.

For further information read: 5 Vitals to Execute a Maximum Value Resale in Czech Republic.

Nathan Brown www.czechpoint101.com

ask for a resale valuation off your Czech property here

The Czech real estate investment market has kept up the momentum seen in the final quarter of 2009. Thus, Q4 showed the positive results of the real estate market’s waking up as interest is growing and demand is slowly starting to turn for the better.

As the Czech unemployment rate went higher through the last half of last year, rental demand turned to a lower standard for example, a person who had been renting a 2+kk changed to a 1+kk. Residential flat rental demand increased as demand for the typically larger priced house rentals went down.

With our ‘on-the-ground’ experience, Prague’s areas outside of the immediate center in the size of 1+kk (studio) or 2+kk (1 bedroom), in the standard of economy or middle class, which have become the most attractive options for renters would be the best right now in which to invest. Of course, in these areas it is critical that the property is accessible to public transport.

The good news is rental has strengthen over Q1 2010 and we expect prices overall to go up through the year.

Khup Gin Khan www.czechpoint101.com (Prague Office).

Are you looking to sell your property in Czech Republic?

Perhaps you want to realize profits from the improved exchange rate, capital gains over the last years or, in the worst case, you have a negative cash flow property which you want to unload. Before selling because of this last option please see our earlier article: 6 Simple Tips to Save 30,000 CZK a Year On Your Czech Rental Property which may help you to turn your cash flow around.

In each case, you want to be able to sell your property and get the maximum value possible for it. Most of the time you will also be under a time constraint due to your mortgage fixation period (see point 1 below). How can you manage both of these things in the sale of your property?

We have compiled our top 5 tips from CZECH POINT 101’s years of real estate experience in the country which are vital for executing a resale for maximum profit.

If you live outside the country and are unable to manage the sale yourself, consider these factors as a criteria list for who you would chose to resale your property.

1. Research your mortgage payout options

Almost certainly you have purchased with a mortgage. The thing many buyer’s don’t realize is that Czech banks have very high penalties if you try to payout the mortgage at a time other than when the fixation comes up for renewal.

The penalty can run up to a massive 25% of the unpaid amount of the mortgage. Ouch, ouch, ouch! There goes any currency gains you were looking forward to.

Also important to realize is that there is an exact time period, sometimes as short as a day, in which the bank expects payment to be made. Missing this by one day can mean paying the penalty.

Often the bank also needs to be notified at least a month before the fixation day comes up that the mortgage is going to be paid out.

As you can see, all of this requires timing and research!

2. Have a price reduction strategy

Based on your deadline, whether it is the mortgage pay down date or a date you personally need the cash, set definite dates at which point you would lower the price if you didn’t have a future purchase contract signed.

3. Advertise the property on ‘for sale by owner’ websites

It has been estimated that 50% of property in Czech Republic is sold without going through a real estate agency.

Why is this?

Firstly, real estate commissions are from 3 to 5% and typically on the higher side of this range.

Secondly, real estate agents have a very bad reputation in Czech Republic for and partly because there are no barriers for entry into the industry as there are currently no regulations for getting a real estate license. Because of this, fraud and agents acting only in behalf of their commission (ie. saying or doing whatever is necessary to get their commission) has been common and continues to occur with alarming frequency.

There are a few ‘for sale by owner’ websites but the one with the most recognition is www.bezrealitky.cz. It is also good to advertise on other real estate servers where agents also advertise including www.sreality.cz.

4. Check real estate agencies’ cooperation agreements

It is not common to have exclusive agreements between a real estate company and an owner in Czech Republic but some real estate firms do require it.

If you sign such an agreement with a real estate firm be sure to check out which other agencies they cooperate and have some rough idea about how the commission would be split if another agency brought a buyer. 50/50 is common but some agencies try for 75/25. If a cooperating agency will only get 25% of the total commission they will not be motivated to bring a buyer.

5. Ensure cooperation of the tenant, if there is one

Inform the tenant early on about the desire to sell the property and try to get their cooperation with viewings. With a conventional rental contract it could be necessary to wait until termination of the agreement in order to hand the ownership over. When using CZECH POINT 101’s contract system, three month’s notice is possible.

For more details on what a tenant’s rights are in a sale situation, see our earlier article on Czech Landlord and Tenant Laws.

Good preparation and following a defined strategy will help you get the best possible return on your property resale in Czech Republic.

Nathan Brown www.czechpoint101.com

For more information you can ask our Czech expert Nathan here

By Nathan Brown

You are just completing on your property and are now being offered a furniture pack. You are surprised about how much it will cost. 36 500 CZK!

You scan the list and see that, yes, these are items you would need if you personally were going to rent it.

However, you need to look at any outlay of money and ask yourself – am I really going to get this back? Is it really worth my money to furnish the property? And if you do decide to furnish, what are some things you can do to reduce your risk? These questions are answered before in the three C’s of Considerations, Calculations and Cautions.

Please note that this article is taken from the consideration of a long-term rental and not short-term, which is a totally different matter.

Considerations

Pros

1. Damage to property is reduced as moving furniture is one of the most damaging events your property will experience

2. Lower vacancy (in some cases)

3. Higher rents

Cons

1. Initial outlay of money for furniture, delivery and installation

2. Additional risk of damage

3. Repairs and replacement

4. Potential of theft

5. Risk of the furniture style becoming obsolete

6. Additional accounting as depreciation is different than real estate (furniture in Czech Republic is depreciated over 5 years and real estate over 30 years)

It seems from this list that cons outweigh pros 2 to 1! Does it make any business sense then to furnishing a property?

Calculations

It all depends on payback. Certainly you should look to have the furniture paid back in 2 years at a maximum. The furniture should last for at least 5 years, depending on the quality of the furniture installed and what kind of tenants you get in place.

How do you calculate if you are getting your furniture paid for over this time period? Well, for sure you need to look at the increased rent you should get for a furnished flat. So let’s say you put out 36 500 CZK for a furniture pack and your flat normally rents for 15 000 CZK/month unfurnished. This means that you would need to rent the flat for 1500 CZK/month more in order to get your pay back in 2 years.

However, there is another factor which weighs in the calculation. If having furniture means that your property would be vacant for 1 less month than if it was unfurnished, this is worth 15 000 CZK right off the start. Thus if you had occupancy one month earlier and were able to charge an additional 1500 CZK/month you would have payback in 14 months. Not too bad!

So it is very important to include vacancy in your calculations about whether furniture is worth it or not.

After the payoff point, you are making money on your furniture! Congratulations, you are now in the furniture rental business, and, most importantly, making money on it.

In terms of the quality of furniture we would recommend, we think only in the rarest of circumstances is it worth furnishing at a luxury level. The additional premium for luxury furniture is, in our experience, rarely recovered in comparison to the same flat furnished with slightly above standard quality of furniture.

In order to assess whether rental is the best option for you, it is extremely important to know the local rental market that you are targeting. If you hire a property management company, you need to know that they have people on the ground with a good knowledge of the local rental market.

A recommendation we have for newly completed flats or flats which had been rented unfurnished in the past but are now unoccupied is to offer them as furnished or unfurnished. You can make a list of furniture which would be required to furnish and then calculate what sort of premium you would need to get a property return. If you are furnishing from IKEA, it is possible to have the flat furnished within a week. However, be sure to have the first month’s rent and damage deposit from the potential renter before heading off to IKEA!

Cautions

If you do decide to rent furnished what are some cautions which can help you to realize your return on this investment?

From our years of property management experience in Czech Republic we would recommend the following:

1. Increase the damage deposit by another half month’s rent

2. Don’t rent to people with pets but, if you do, increase the damage deposit even more

3. Consider carefully before renting to smokers. It is possible to remove a smoke smell from an unfurnished flat but rarely will it be possible if it is furnished. A smoker early in the life of the furniture could decrease the return you will get on it

4. Furnish at a basic standard (medium to slightly above medium quality) and not completely. The tenants can add filler items (pictures, plants, kitchen items, etc.) which can be costly and are the most easily damaged pieces of furniture.

By stepping through the three C’s of furnished properties in Czech Republic, you can decide whether you should go into the furniture rental business or not!

Nathan Brown www.czechpoint101.com

It has been said that 95% of the work of property management is done before the tenant actually occupies the property. Rush this and you can pay (monetarily and emotionally) for months. Here are three critical tips for making the most of this crucial stage.

1. Put your property in the spotlight

Get your property out to as many venues as possible. The more interested parties, the more chance of selecting a good tenant.

Of course, nowadays the internet is one of the most effective methods of advertisements and that also goes for the Czech Republic.

A large rental market in Czech Republic is the foreigners. Do you know where the foreigners look to find rental properties? There are many websites which have forums in different languages which often have a posting section of properties for rent. Find which ones they are and keep a record of it for future requirements for rental.

Don’t overlook the local rental market.

Talk to locals and find out where they would look to find rental properties. A major local website is the real estate directory: www.sreality.cz. Post your ad in both English and get a friend to help you with the Czech side.

Locals also like to try to rent without using a real estate agency because of their standard fee of a month to month-and-a-half rent. So it is good to list your property on websites which are without commission such as: www.bezrealitky.cz.

Referrals are an excellent way to get quality tenants.

A famous Japanese proverb says: “when a character of a man is not clear, look at his friends.” Do you have good tenants who pay their rent on time, respect your property and are good to deal with? Ask them for a referral. In fact, you can even offer them a one-time bonus for helping you find a quality tenant. 500 to 1000 CZK is nothing compared to the value of getting in a good long-term tenant.

2. Screen your tenants

Ask for references! Potential tenants should be able to provide you with references to their boss at work and their last landlord at the drop of the hat. A good tenant who has good relationships will have no hesitation offering you contact for their boss and previous landlord. Any hesitation is a bad sign and stroke against the applicant. Of course, a potential renter truly may not have the contact information on them but in 95% of the cases, they would.

Check the references. Don’t be afraid to phone the references and make sure everything sounds legitimate.

Faithful in little, faithful in much. You can, to a certain extent, judge character by how they handle the few contacts that you have with them. Do they show up on time? If they are late (it happens to all of us) do they apologize or just ignore the situation? Are they respectful of you and your property? These can all be indications of how the tenant will continue to treat you in the future.

3. Get it in writing

Be sure to document everything in a relationship, right from the start. Make notes on the contracts if something unexpected occurs at the time of signing or inspection. No one has a perfect memory and it is also the case that you might promise something and not remember two months down the road. So put everything in writing.

Be sure to have professional contracts. Make sure your contracts fair for both parties but be sure that your rights as landlord are protected. In Czech Republic the laws are very strict in favour of the tenant in a direct tenant-landlord relationship. Under this relationship, it takes either a court proceeding or the tenant’s written agreement to use some of their damage deposit toward legitimate damage they have caused.

CZECH POINT 101 have developed a unique contract system which both protects the owner and has fair terms for the tenant. Read more about tenant’s legal rights in the Czech Republic on our blog here: http://www.czechpoint101.com/newsletter/?p=123.

Have the agreement in English and Czech. It is not fair to have a contract in a language not understood by the tenant. Of course, you cannot be expected to translate a contract into Swahili but having both English and Czech ensures that the tenant clearly understands the terms of the rental.

Do your work up front, or ensure that your property manager is doing this, and you can be guaranteed better return on your properties and more sleep at night!

Nathan Brown www.czechpoint101.com

Cash flow is the life blood of an investment. Without cash flow the investment can rightfully be called speculation.

Many investors bought in Czech Republic at a time when cash flow was not positive unless large amounts of cash were plunked down as a deposit. However, that does not mean that you just want to give up on your investment, call it a write-off and move on. Much can be done to improve the cash flow of your investment by tweaking little things.

Here are our top tips for maximizing cash flow on your Czech ‘buy to let’ property investment which, potentially, could result in you putting a staggering 30 000 CZK in savings into your pocket each year.

1. Make sure your property is not insured twice (savings: 100 to 200 CZK/mo)

It is usually the case that the bank granting the mortgage will require proof of property insurance before releasing the funds. Many buyers take out new insurance, not realizing that there is often insurance which the building association also takes out on the building.

You will never get paid twice for the replacement of the same property so this is a waste of money.

Note: it is good to check what exactly is covered by the building association’s insurance because sometimes it would not replace the finish inside the flat (ie. flooring, kitchen, furniture) and also would not cover liability. However, these items can be added separately by the owner still resulting in savings of at least 100 CZK/month.

2. Including water usage in the utility fees paid by the tenant (savings: 100 to 250 CZK/mo)

Although not common in other parts of the world it is normal here for the tenant to be responsible for the consumption of water.

3. Always collecting more than the normal monthly deposit required by the utility companies – otherwise transferring utilities into the tenant’s name (savings: 200 CZK +/mo)

Try to transfer whatever utilities possible into the name of the tenant. When not possible, be sure to collect more than the average monthly deposit required by the utility company.

Usually the meters are only read once a year which means your tenant could be long gone having racked up a monster utility bill which you will never collect from him. It is always easier to return money to a tenant than try to collect more after they have moved out.

4. Minimizing vacancy periods by having a lengthy cancellation (savings: up to one month’s rent/year)

Make sure to have a lengthy notice period (2 to 3 months is normal here) in order to give yourself ample time to source another tenant including renewing advertising, showing the flat and getting another contract signed.

If you are in a strong market and you are confident about getting another tenant quickly, it is possible to give exceptions to individual tenants but having a lengthy period can save vacant periods of up to a month.

5. Minimizing turn-over (savings: up to one month’s rent per year)

Is there some persistent problem with your property which results in tenants not being content and moving before an average tenancy period? Every time your property changes tenant’s hands it costs you with advertising, showings, vacant periods and move-in/move-out damage.

Here is a previous article on how to keep your quality tenants in Czech Republic: http://www.czechpoint101.com/newsletter/?p=380.

6. Minimize bank fees (savings: 200 to 500 CZK/mo)

Bank fees in Czech Republic are disgusting.

There is no other way to put it. Especially coming from a very competitive banking atmosphere like I did in Canada was I shocked at the amount of money that went out the door for bank fees.

But is there anything you can do about it? Yes there is! Especially if you purchased property through an SRO or Czech company.

In such a case you have a terrible layer of two to three bank accounts. Sometimes you will have your SRO bank account, then a personal bank account which is mandatory with your mortgage and then your mortgage account. All, in fact, are necessary according to bank lending requirements and state laws regarding SROs. What can be done in this case?

We can strongly recommend setting up a bank account with Fio for your SRO. Fio offers a banking services which has almost no fees. It’s accounts are covered by the same insurance offered by the State of up to 50 000 EURO in one account so your money is safe.

For an SRO which is only held for the purpose of owning property, this can save up to 500 CZK a month in bank fees.

If you don’t want to do this, at least minimize the number of times you get printed bank statements, cancel your bank card and look at all other ways to reduce the fees you are paying.

Do you think some of these suggestions have a return that is too little to act on?

Think of how an eves trough combines even a small amount of falling rain over a large area to equal a sizable amount of water coming out the spout. It is the same with your rental property, by taking care of all these little things you can do each month it can result in a sizable return at the end of the day.

Nathan Brown (Czech Point 101)

“In this world nothing is certain but death and taxes.” – Benjamin Franklin

________________________

Under Czech law, if an individual owner is collecting rent from the rental of a Czech property, they must file a tax return in Czech Republic.

This is also the case for those who own their property through a Czech company or SRO.

In both cases a tax return must be filed even if there was no net profit. Losses can be carried forward to offset income in a future tax year.

There is a double-taxation agreement between Czech Republic and the UK or other EU countries which would prevent you from paying taxes in another country.
________________________

Here are the upcoming tax deadlines for the 2009 tax year:

Property Tax Registration: January 31, 2010
(required for all properties where a new owner was registered in the Land Registry in 2009)

Individual Income Tax: March 31, 2010

Corporate Income Tax: March 31, 2010
(if power-of-attorney has been given to a registered tax advisor such as ours this date is extended to June 30, 2010.)
________________________

We are happy to offer the following services for our clients directly from our internal accounting team:

Property Tax Registration: 1500 CZK + VAT
(we would complete and submit the application to the appropriate Financial Office with power of attorney)

Property Tax Registration form: Free
(please email us and we will send you the correct application free of charge: accounting@czechpoint101.com)

Rates for our existing Property Management clients:
(in CZK and without VAT)

Income Tax Processing and Filing – Individual:
1st Property – 5250 | 2nd Property – 2500 | Additional Properties – 1750 ea.

Income Tax Processing and Filing – Corporate:
1st Property – 7500 | 2nd Property – 2950 | Additional Properties – 2250 ea.

Rates for clients who are not our Property Management clients:
(in CZK and without VAT)

Income Tax Processing and Filing – Individual:
1st Property – 7250 | 2nd Property – 3500 | Additional Properties – 2750 ea.

Income Tax Processing and Filing – Corporate:
1st Property – 8500 | 2nd Property – 3950 | Additional Properties – 2750 ea.

Discount for Property Secrets Members:

If you would like to use CP101 to register your property! Email here or call 0115 9853963 before January 15th 2010 and get ahead of your tax deadline for HALF PRICE!

Nathan Brown (Czech Point 101) www.czechpoint101.com

In the year 2008 Ostrava region saw the incredible property price increase of close to 30%. So far this year prices have either decreased slightly or stagnated. The developers for new flats have, in most cases, been keeping the same prices as during the peak but offering things like free kitchens or a 10% discount for the first 10 buyers. Purchases have not seen a recent increase in transaction activity which other centers like Brno and Prague saw.  

However, on the good side, there is increasing demand for the renting of flats, so rents in many localities have gone up. One website which lists properties for rent, bezrealitky.cz, said that there was an increase of rents, on average, of about 8% from the beginning of this year in the region and demand for rental properties has increased by about 10%.  

Ostrava is certainly a region with growing potential, for many reasons including progress on the highway between Ostrava and Prague. It promises better traffic access and will bring more opportunities to the area. 

As well, car production factory Hyundai expects to employ around an additional 700 people in next few months and another 700 to the end of 2010.  This does not include the additional jobs created by all the related businesses with this factory.  

One of the regions of Ostrava, Frydek-Mistek, also saw the rapid increase of property prices in 2008. Market prices of flats and the rents have been positively affected by the fact that a lot of money has been invested into manufacturing in this region (including the above mentioned Hyundai factory and satellite companies) and the fact that the highway between Frydek-Mistek and Trinec (Cesky Tesin – Poland) was completed. However, the area became overheated and there has been an overall decrease in values in the area since the beginning of 2009. All indications are that this has stopped by the time of the writing of this article.  

All of these developments over the last year or so in the Ostrava region have emphasized the importance of considering factors such as locality, type of dwelling and the overall quality of living when considering where to purchase.

Tomasz Repasky (Czech Point 101).

©2009 CZECH POINT 101 s.r.o.

This report is published for general information only. Although high standards have been used in the preparation of the information, analysis, views and projections presented in this report, no legal responsibility can be accepted by Nathan Brown or Czech Point 101 for any loss or damage resultant from the contents of this document. As a general report, this material does not necessarily represent the view of Czech Point 101 in relation to particular properties or projects. Reproduction of this report in whole or in part is allowed with written permission from Czech Point 101.

Overall the markets seem to have stabilized and there was some pent-up demand being satisfied in 3Q 2009. Statistics have shown a price increase of 0.5% for this period. Prices outside of Prague increased by 2.1% while Prague itself decreased by 1.4%. Q1 and Q2 of this year saw a combined fall in prices of around 7% over all of Czech Republic, according to statistics.

Not too bad considering the banks’ current mortgage lending and the recession thinking which plagued everyone.

Below are some details from individual areas:

Brno: Prices have fallen over Q1 and Q2 of this year similar to the figures for all of Czech Republic. However, in the last month we have sold three flats only 8% under their peak price in late 2007. All three were reserved within days of being listed. If the owner had not been keen to move them quickly we feel we could have sold them at only 5% under peak prices. The client was using our Gold PoA Sale Service.

The prices the flats were sold for and the proven rental on them gave them a rental yield of 7.3%. Up considerably from the 5% which late 2007 saw the flats being sold for.

Prague: Prices have moved down slower than other areas but seems to now still have the momentum as it saw the biggest continued decline in 3Q 2009.

Ostrava: Prices has fallen similar to Brno but it didn’t see the jump in 3Q that Brno saw. It might be a slow starter.

With some pent-up demand being seen in purchases now we feel that the absolute best purchasing window may have passed now. We don’t think buyer’s will have the upper hand as strongly as they did about two months ago.

However, we expect it to remain overall a buyer’s market and prices to remain stable at least until spring 2010. If you have been holding off on a purchase of a rental property, this is a great time to get yields of 7 to 8%. With mortgage rates at around 5% and 80% LTV it is a good time for strong buyers to pick up some cash flow positive properties!

Nathan Brown