Why is Czech Real Estate Market Attractive to Foreigners?
The foreigners' interest in purchase of real estate in Czech Republic is growing. According to Jiří Pácal from Central Europe Holding 30 percent of real estate in new projects are owned by foreigners (data are derived from the real estate cadastre and are related to September, 2012).
Attractive real estate in Czech Republic
This share could be much higher if we knew nationality of owners of flats registered as a companies' property and took into account new buildings belonging to Slovaks.
However these figures can be hardly calculated, therefore let me be content with the initial number which is high even without just mentioned adjustments and provide reasonable explanations why foreigners find attractive real estate in Czech Republic.
If you've decided to invest in real estate abroad you're likely to start your search with relevant legislation of a particular country, in other words, under which conditions you are entitled to buy real estate located within its territory.
In the past Czech legal system had a number of requirements applied to foreigners willing to buy real estate in Czech Republic such as temporary residence permit for EU citizens and nationals of the U.S., Switzerland, EEA (with some exceptions – e.g. agricultural land couldn't have been acquired) and permanent residence permit for nationals of third countries other than those mentioned above.
It could be also establishment / purchase of Czech legal entity on whose behalf later the transaction(s) with real estate would be conducted, etc., last year the situation changed fundamentally.
Every foreigner is entitled to own residential real estate in Czech republic
As a result of expiration of the transition periods granting Czech Republic a right partially not to comply with the Treaty on the functioning of the EU (which implies free movement of capital between Member states and a Member state and a third country) the above mentioned restrictions were removed.
The Amendment No. 206/2011 proposed to the Act No. 219/1995 Sb. and entered into force on 19 July 2011 says that every foreigner irrespective of type of his/her residence permit is entitled to own residential real estate or/and private land within the borders of Czech republic. If you are a citizen of the EU, Liechtenstein, Norway or Switzerland there is more good news for you.
On 21 February 2012 Vaclav Klaus signed the Amendment thanks to which the nationals from the enumerated countries gain the right to buy state land. In case of subsequent transfer of the purchased land to a legal entity the condition that it will be used for agricultural purposes should be met.
During your search of real estate investment opportunities you will definitely pay attention to a risk factor. If you are a prudent investor (whom you have better to be learning lessons from current economic turmoil) you will prefer the country with low risk. That's one of the reasons why a lot of Russians become more and more interested in buying real estate in Czech Republic.
Purchase of real estate in Russia demands from a person great deal of caution and deep knowledge of real estate market specifics. In other case the client is likely to be deceived.
Dealing with Czech real estate agencies Russians feel more secure, they trust local intermediaries more because besides being professionals in their field they are well-informed of credit opportunities, real estate insurance and different legal aspects related to the subject in question.
Mortgage interest rates are very low
Another thing which can influence your decision in favour of Czech Republic is the fact that mortgage interest rates stay very low. This factor is of special importance for nationals of countries with turbulent economic environments because their domestic banks are usually willing to lend money at higher interest rates.
Needless to say, certain conditions should be met by a foreigner if he/she wants to get credit from a Czech bank. If you do not have a permanent residence in Czech Republic you must live here for at least 2 years and have a high income in terms of salary during this time (that concerns third-country individuals).
Besides all these things it's important to know that without permanent residence you will be perceived as a riskier client and as result bank will charge a higher interest on your loan. However even in this case the interest rate is likely to be lower than that in your domestic market.