Czech property very good bet for British investors, says UK analyst

Prague

According to some reports that have appeared on British internet sites recently, the Czech Republic is currently the best place for UK investors to buy property in the whole of the eastern Europe region. The reports have been quoting the investment advisers and agents Property Secrets, specifically their chief analyst Simon Tweddle, who himself lives in Prague. I asked him: why is the Czech Republic such a good place to invest in property?

"Prague is very blue chip. It's got very strong economic fundamentals. It's always attracted a huge amount of foreign direct investment - one of the highest rates of FDI per capita in central and eastern Europe. It's got very, very good finance - banks are willing to lend on the property market here, which means the local banks have strong confidence in the market. There's very low unemployment, wages are rising very nicely.

"Basically the economic fundamentals mean that the Prague and the Czech property market is not going to be here today, gone tomorrow. We're going to see steady growth over the medium to long-term."

How high are growth rates here? And if they are high, will that be sustained, do you think?

Prague
"Over the last year in Prague alone we've seen something like 25 percent year on year growth over the last year. In some of the secondary cities we've seen growth rates of 30 to 35 percent and even a little bit more. So very, very high growth rates.

"In the next two to three years I think growth rates of 20 to 25 percent are probably sustainable. Then after that we'll probably see them calm down to 15, 10 percent.

"But I think given that Prague has had a period of two years between 2004 and 2006 of quite quiet growth, where the market had to really consolidate quite a lot, I think it's in a much stronger position now, where such healthy growth rates are more sustainable for the medium term."

In technical terms, how do British investors go about investing in property in this country?

"The main way that investors from the UK or Ireland come to the Czech Republic is through agents. There are many UK agents in the UK that are promoting various different investments around central and eastern Europe, including in the Czech Republic.

"Basically the country will agree a deal with a local developer. They'll reserve a bunch of units, say 20 units, off-plan - then they'll market those units to UK clients. They use a local lawyer and a local finance broker essentially to arrange all the paperwork and arrange a mortgage.

"So it's a very, very simple process - you pay your money and you buy your property, effectively."

Isn't it simply unfair in a way for rich British investors to invest in property here, drive up the prices and make it harder for young Czechs especially to get onto the property ladder?

"Well, it's really the local people who are driving up the prices, not the foreigners. The foreigners that are coming to Prague still represent a small percentage of the overall number of properties sold per year.

"The locals have rising wages, there's a lack of supply of newly built property in the city - you've got restricted supply and demand created by locals who've got good jobs, there's very low unemployment in Prague.

"Also people have access to mortgage finance, which means if you can get an 80, 90, 100 percent loan to buy your mortgage you have to put very little of your own money in. Which makes property in the city very affordable for locals, and it's really the locals who are driving up the prices - not the foreigners."