Czech Republic
The Czech Republic has a population of 10.2m people and is situated in the centre of Europe with borders to Poland, Austria, Germany and Slovakia. As a result, it is ideally positioned within the heart of the European Union ("EU"). The economy of the Czech Republic and its capital Prague has grown significantly in recent years, with its entry into the EU in May 2004 providing a catalyst to further economic expansion. Whilst the Czech Republic remains one of the most developed of the Central and Eastern European countries, its accession into the EU has brought with it both the advantages of the single regulated market and improvements in infrastructure through additional EU
funding. This combination of location, an educated workforce and a growing
economy, has stimulated high levels of domestic and foreign investment.
Why Invest in Czech Republic
The Attractions of Residential Property in the Czech Republic
- The Czech Republic joined the EU in May 2004.
- Prague is widely acknowledged to be an attractive City destination within Europe.
- There has been a noticeable shift away from old style communist tenements towards new build housing.
- Knight Frank estimates that 20,000 dwellings a year will be removed from the housing market (due to age and deteriorated condition). While the Czech statistical office estimates that there is a need to finish approximately 50,000 dwellings annually until 2010.
- Interest rates have fallen dramically, they stood at 12.9% in 1997 and currently stand at 2.26%. This has significantly reduced loan repayments and improved affordability of housing.
Growth Drivers in the Czech Republic
- Strong macro economic forecasts (see table).
- Foreign direct investment doubled in 2005 compared to the previous year.
- Due to EU membership and its position on the logistical hub of continental Europe, Prague has attracted companies such as DHL, Exxon Mobile, and Accenture to move parts of their operations there.
- Despite the hype, foreigners currently only represent about 2% of purchasing activity in the housing sector.
Key risks of investing in the Czech Republic
- Although falling, unemployment is still higher than EU 15 average at 7.5% in 2005.
- Still lower than EU average owner occupancy rates (47%).
- VAT on residential construction likely to increase to 19% 1.1.2008.
| Czech Republic | EU 15 Average | |
| Forecast Changein Interest rates (2006 - 2010) | 1.00% | 0.72% |
| Forecast Employment Growth (2006 - 2010) | 4.94% | 4.03% |
| Forecast Earnings Growth (2006 - 2010) | 31% | 18.35% |
| Forecast Inflation (2006 – 2010 av. % pa.) | 2.7% | 2.04% |
| GDP/Capita (change 2006 - 2010) | 69.21% | 35% |
Summary of why to invest in the Czech Republic
- Old housing stock is in major need of replacement.
- Supply/Demand factors remain favourable in the Czech Republic.
- Wages continue to outpace the EU 15 average.
- Foreign Direct investment shows little signs of slowing.
- Unemployment currently higher than average.
- VAT rises expected 2008.
For further information about investing in property in the Czech Republic, please contact our sales team on 020 7763 7170