On Offer Czech Republic

Americka Park’s 12 luxurious apartments are set in 7,000 square metres of private landscaped gardens in an exclusive area of central Prague often likened to London’s leafy Kensington. Apartments range from 112 to 250 square metres and all feature large windows and high ceilings. A fitness club with swimming pool and sauna is on the premises for the exclusive use of owners. There are on-site security guards plus a video surveillance system and 24-hour reception. Underground parking is included.

At a glance:

Cost: ™3,200 average per square metre; description: spacious apartments, many with private gardens, terraces and spectacular views; location: the central Vinohrady area of Prague District One; contact: Knight Frank www.knightfrank.com

Czech Republic

‘Z’ is a small niche development in the sought-after residential area District Five, west of Prague’s historic centre. The leafy neighbourhood is composed of detached villas, townhouses and some apartment buildings. The development – being targeted at local professionals as well as the mid-range sector of the expatriate market – includes an on-site gym and sauna.
Terraces, fully fitted kitchens, parking and storage spaces are integral to the project, scheduled for completion in September 2005.

The landlocked Czech Republic and its ancient capital Prague conjure up images of Good King Wenceslas, Dvorák, Kafka, the ‘Prague Spring’ and more recently the ‘Velvet Revolution’ in 1989, when dissident playwright Vaclav Havel ushered in an era of democracy.

With a population of just over 10 million and a land mass nearly twice the size of Denmark, the Czech Republic is nowadays one of the most prosperous of the post-Communist states. Recent accession to the European Union, efficient infrastructure and a diverse architectural heritage (including Gothic, Baroque, Renaissance, and art nouveau) make the Republic ripe to become one of Europe’s most attractive and affordable property hotspots.

Market muscle

According to PricewaterhouseCoopers in Prague, the considerable demand to invest in Czech property that emerged in the lead-up to EU entry continues today. Most experts agree, though, that EU accession last May did not have a big impact on prices because steep increases had already taken place in the years of market positioning before entry.

“Overall, EU entry has had a very positive effect on the property market,” says Simon Hill, MD of international consultancy firm Letterstone plc. He identifies two main contributing factors – the first relates to inward investment from the EU and the influx of capital and people. The second he attributes to the emerging Czech professional middle classes who are buying property. Although cities like Brno are in the ascendancy, Prague remains the country’s primary residential market.

Research from Letterstone identifies three price sectors in the capital. In the first, a square metre costs from CZK22,000 (™701; US$878) to CZK40,000 (™1,275; US$1,596). Most transactions are in this sector. In the second sector, where demand normally outstrips supply, a square metre ranges from CZK40,000 to CZK75,000. In sector three, prices start around CZK75,000 and go upwards of CZK160,000 a square metre.

Location is the most crucial factor in the higher price range. “To date most sector-three properties have been in the heart or the vicinity of the historic centre, or in the prestigious ‘villa quarters’ of Vinohrady and the 5th and 6th districts of Prague,” says Hill. (See ‘Property Roundup’.) Due to the restrictions on construction in the centre, demand continues to exceed supply.

Away from Prague there are no shortages of castles for sale. For example, a fairytale castle with 60 bedrooms (the second-largest castle in West Bohemia) is on the market for US$9.3m. Then, just 15km from Prague is a baroque manor house overlooking the River Vltava for US$1.2m. For smaller pocketbooks there are plenty of country cottages (chalupy), some of which can be bought for around US$25,000.

Economic acumen

Economic liberalisation progressed rapidly in the lead-up to EU membership. GDP grew by 2.9 per cent in the year 2000 and continued at a rate of 3.8 per cent for the first quarter of 2001. Macroeconomic reforms and massive fiscal restructuring have contributed to 3 per cent annual economic growth over the last three years. Sweeping privatisation initiatives and generous investment incentives have made the Republic the leading recipient of foreign direct investment among all new entrants.

The country has also achieved one of the highest per-capita GDPs of new Central and East European members of the EU (with the exception of Slovenia). GDP is currently at the approximate level of Greek and Portuguese GDP for 2001. The Czech Finance Ministry expects 3.1 per cent growth this year and 3.2 per in 2005.

Last word

While it is now easier for EU citizens to work and live in the Czech Republic as a result of EU membership, certain restrictions on the purchase of property remain. For example, the country won an exemption to prohibit the free acquisition of real estate by EU nationals until 2009 in order to give the local market time to align more closely with markets in other EU jurisdictions. However, this does not preclude EU nationals (or others) from buying property, because the route to purchase through a limited company – locally termed an SRO – remains intact. An SRO typically costs less than $2,000 and can be set up through a lawyer.

But, lest we forget, the Czech Republic is an emerging market, and as a post-communist state the privatisation of property is in its infancy. Property scams that entrap unsuspecting foreign buyers are well documented. “The biggest pitfall is not seeking enough advice from legal and accountancy firms,” says Hill. “I cannot emphasise enough the importance of good advice.”

Saundra Satterlee