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