Is it time for in­vestors to take a fresh look at Prague?

The Daily Telegraph - Property - - Front Page -

This year the Czech Re­pub­lic has a num­ber of rea­sons to cel­e­brate. Not only is it hon­our­ing its 25th birth­day – fol­low­ing its “Vel­vet Di­vorce” from Slo­vakia – but it’s also 100 years since the cre­ation of an in­de­pen­dent Cze­choslo­vak na­tion.

Much of the com­mem­o­ra­tion will be fo­cused on its beau­ti­ful and his­toric cap­i­tal, Prague, the en­gine of both its eco­nomic suc­cess and buoy­ant tourism. The city’s cen­tral lo­ca­tion within Europe has made it a pop­u­lar hub for multi­na­tional com­pa­nies, es­pe­cially au­to­mo­tive firms such as Skoda, BMW and Mer­cedes-Benz.

Its house prices are also mo­tor­ing. In Knight Frank’s in­dex of house prices across the globe, the Czech Re­pub­lic was ranked fifth high­est for growth, with a 12.7 per cent rise year-on-year. So, is it time for prop­erty in­vestors to take a fresh look at Prague?

The bo­hemian “city of a thou­sand spires” was a pop­u­lar emerg­ing mar­ket for Bri­tish and Ir­ish buy-to-let in­vestors in the “boom” years af­ter its ac­ces­sion to the EU in 2004. The fi­nan­cial cri­sis killed off over­seas de­mand for a few years, but since 2016 a drop in Czech mort­gage rates (to 1.8 per cent) has prompted an­other prop­erty boom.

“With good trans­port con­nec­tions to the rest of Europe, the strength of the Czech ko­runa and ex­cel­lent value per square me­tre for res­i­den­tial prop­erty, the Czech Re­pub­lic is again at­tract­ing grow­ing in­ter­est from in­ter­na­tional buy­ers,” says Cyril De­janovski of agent Svo­boda & Wil­liams, af­fil­i­ated to Christie’s In­ter­na­tional Real Es­tate. “The big­gest po­ten­tial for in­vestors is in long-term lets to ex­pats and young Czech pro­fes­sion­als.”

In Prague pre­mium res­i­den­tial ren­tals have grown al­most 20 per cent in the past year, while in pre­mium sales, the rise has been 15 per cent. “We ex­pect sin­gledigit rises in sales val­ues for 2018, yet ex­pect rental yields to in­crease over the next few years,” says De­janovski.

What do the new wave of in­ter­na­tional buy­ers – from the UK, France and Rus­sia – look for? The cen­tral dis­trict of Prague 1 is a top lo­ca­tion, in­clud­ing Jose­fov, the an­cient Jewish Quar­ter; Mala Strana, the choco­late­box Old Town neigh­bour­hood on the other side of the Vl­tava river; and the Nove Mesto, or “New Town”. There’s very lit­tle sup­ply in these ar­eas where new projects are mostly the re­fur­bish­ment of his­toric build­ings, so prices are rel­a­tively high, at around €558 to €744 (£496 to £661) per sq ft. In the Jewish Quar­ter, there is a new apart­ment with sleek modern in­te­rior de­sign, two ter­races and views over the city’s spires for CZK64.8mil­lion (£2.28mil­lion), avail­able through Christie’s In­ter­na­tional Real Es­tate.

Apart from the out­ly­ing dis­tricts of 4, 5 and 6 where the di­plo­matic quar­ter and in­ter­na­tional schools draw wealthy fam­i­lies, Prague 2 is the most pop­u­lar cen­tral res­i­den­tial area for ex­pats and in­cludes Vi­nohrady, the “Soho of Prague”. “Bri­tish, French and Ital­ian buy­ers love this area and it’s where I see the big­gest po­ten­tial rental mar­ket,” says De­janovski.

Mark Batt, of agent Bou­tique Realty, agrees. “Vi­nohrady and also the slightly more af­ford­able Vrso­vice in Prague 10 have re­ally taken off in the past year. Vrso­vice is a hip­ster area – a for­mer in­dus­trial area of art nou­veau build­ings that has gen­tri­fied,” he says.

“The apart­ments are worth around €329 to €366 per sq ft and the gross rental yields 3 to 3.5 per cent.” Buy­ing costs are around 4 per cent.

There is a lot of com­pe­ti­tion in the hol­i­day rental mar­ket. An­glo-Czech cou­ple, Ilan and Veronika Mor­ris, rent out a two-bed­room flat over­look­ing the Charles Bridge, from £71 per night through TripAd­vi­sor. They have eight other prop­er­ties in Vi­nohrady, Mala Strana, Old Town and New Town. “We only pur­chase top-qual­ity hol­i­day lets in the best lo­ca­tions, ide­ally with unique sell­ing fea­tures such as bal­conies, ter­races and views which mark them out from the com­pe­ti­tion,” says Ilan.

“The de­mand for qual­ity hol­i­day ren­tals is in­creas­ing. Prague is one of the most beau­ti­ful cities in Europe and the restau­rant scene is much im­proved.”

There are some happy Bri­tish ex­pats too – in­clud­ing Ben An­der­son who runs the city’s ukulele fes­ti­val: “It’s changed much since I ar­rived in 1992 but it’s still a unique city. It’s gained chain stores and a lit­tle more glitz but it’s not been spoilt. It’s a safe, vi­brant city.”

A pent­house with city views, left, CZK87m, and a flat in the Jewish Quar­ter, be­low right, CZK64.8m, both with Christie’s In­ter­na­tional Real Es­tate

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