Mortgage advisor – “There are quite a lot of myths among expats about buying property here”
Mortgage advisor – “There are quite a lot of myths among expats about buying property here”
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Many expats living in the Czech Republic are considering buying a property in the country, but for a non-native speaker and foreign national this may sometimes feel like a challenge. To find out more about the most common challenges expats face in this regard we spoke to Robin Petrásek, a mortgage advisor who administers the “Czech Expats property owners group”, a Facebook group of nearly 6,000 people looking to buy or manage their property in Czechia. I began by asking him how the group came to be.
“We got involved about three years ago, when we took it over from the original founders. The administrators of it are myself and my colleague Nick Marley.
“What we are basically trying to do is put together a community of expats and make sure that only valuable members are inside it.
“That means that we check who wants to become a member and we moderate each post inside the group to make sure that all of the discussions are relevant to the topic.”
So I am guessing that you don’t know how the group actually came about?
“Actually I do know.”
Well then, tell me the story.
“The story is that one expat, about five or seven years ago, was struggling to find some things.
“This is often still the case, because while it may be easy to google things in your home country, if you are an expat in the Czech Republic it may be often be quite hard to find information that would be easily searchable for a native national of the country. Of course you ask your parents, or your friends, but it can still be hard.
“In any case, this person founded the group and slowly, organically, it grew into the amazing audience that it is right now where expats share their experiences with others on tips relating to administration, renovation, basically everything related to owning an apartment in this country and making life in the Czech Republic easier.”
You yourself work in a company called Expat Finance which helps with mortgages, so it sounds like you are the ideal administrator for this group since you work in a related area.
“Yes, Expats Finance is a company which I started about five years ago. It is focused of providing financial and mortgage advice for expats looking to buy a property in the Czech Republic.
“Together with [the other administrator] Nick and his company ISG, we offer a one-stop solution for any expat who wants to buy a property here.
“We cover everything from the initial property search, through viewings all the way to possible evaluations and assessments, basically everything that is connected with the process.”
I am guessing that most of the members of this group are expats living in the Czech Republic?
“That’s true. It wasn’t like this always.
“Not in this group, but when we started our business about nine years ago. Or, better said, when i joined Nick’s business, about 90 percent of our clients were foreign investors who were investing in the Czech market from abroad.
“They were not expats living here, but rather foreign investors. However, over time, this pretty much shifted completely the other way round.
“Now, 90 percent or even 95 percent are local residents. The investors are not completely gone per se, but they are either investing in cash or through other means.
“It also has to do with bank regulations and other means. This is because back in the day it was relatively easy to find financing for foreign investors, but these days it’s pretty much impossible.”
When would you say exactly that this shift occurred?
“Well, I joined the market in around 2014. I would say that around 2016 or 2017, the Czech National Bank came out with new regulation and the law also changed.
“Slowly thereafter, the banks started to withdraw their special products for expats with financial income from abroad.
“The key element here was that they had no connection to the Czech Republic. So if you want to imagine a foreign investor, it could be an American or British client living in the UK or America with almost no ties to the Czech Republic.
“It was possible for them to get financing in the Czech Republic by using leverage in local banks. However, over time, this pretty much stopped as a product and these investors are now gone.
“Also, the rental prices and the rental yields in Prague, if we were to compare it to the rest of Europe and world, are nothing great. The percentage yield, for a regular renting out, would be between 2 or 3 percent of the purchase price which isn’t that great of an investment.
“If you look at the UK or the US, you should see 5 percent or higher. What made this [disparity] better, or more interesting, was Airbnb. However, then the coronavirus pandemic came around and that caused big changes in the game.”
So we have basically characterised your regular expat member. It seems to be someone who is looking to buy their own flat in Prague, or something like that?
So what are the typical questions that you get from these foreigners? I know that you touched on it a bit, but for any foreigners who might be listening to this interview and who are thinking of investing their money into a Czech property, what sort of things should they be aware of?
“Perhaps the most common question for this group is whether they can get financing in the Czech Republic with their residency status.
“Typically, to give you an example, these can be people who have come here from outside of the EU perhaps a year ago and still don’t have permanent residency.
“They are looking around, they love the country and they want to settle in, perhaps buy their own property. However, they aren’t sure if they are eligible to get financing if, for example, their wife is on maternity leave or they have a two years contract here and do not have a residency permit yet. ‘Can I get financing and, if so, at which level?’ This is a sort of typical question that I would answer.
“There are also quite a lot of myths, or misperceptions. For example, it can be what I just mentioned, that if you do not have permanent residency you cannot get 90 percent financing or, indeed, no financing at all.
“Another is that you cannot get any financing at all because your bank told you that you are not eligible.
“These sorts of misperceptions can happen if people only speak to one bank or with their friends about it. Things can be misunderstood, or they can simply change over time. Something that was true a few years ago can change, or no longer be relevant.”
Interesting. I guess that this also partly answers the question of what is the difference between questions asked by Czech and expat clients. Is there anything else in which these groups can differ? For example when it comes to the type of properties that they are interested in?
“I would say that the process is different based on what country you come from.
"If I would compare this with the Nordic countries for example, there the process is digitised and is much faster.
“When it comes clients from the United Kingdom, they are sometimes surprised at the bureaucracy in the Czech Republic and that things can take longer here, or at least they are surprised at how complicated they seem.
“That’s where we step in. We want to be the middle point between the client and everything else, so that they don’t have to deal with the paperwork.
“In any case, the difference would be in questions such as what documents you need, how long does it take, or indeed things that a Czech person would not need to ask for, such as residency.
“Another common question is: ‘What do i need to do if I leave the country?’”
What advice would you give foreigners who are thinking of buying property in the Czech Republic?
“I would say that it does help to have some sort of residency status here in the Czech Republic, at least with the paperwork.
“It does happen that I have clients who are EU member state citizens, have lived here for five or seven years and do not have temporary residency status at all in the Czech Republic, because you don’t need it as an EU citizen.
“However, not having residency does limit one’s financing options. Therefore, if you do have the time and want to get financing or purchase a property in the next few months, it is a good if you already have your residency sorted out.”
Has the coronavirus pandemic had any impact on this as well?
“Yes, certainly. Coronavirus was a big thing that impacted pretty much every aspect of it.
“Let me start with the good news related to the banks, which I have noticed as a mortgage advisor - digitisation sped up.
“Things which could have previously taken up to five years were now done in a space of a few months, all for the sake of processing things remotely. This is the positive impact of the pandemic - the process improved.
“When we come to the negatives - it did have an impact on Airbnb (although of course it is only negative from a certain point of view).
“In any case, people who owned properties as investments and were counting on an Airbnb income, which was about double of what could be earned through renting out the property to tenants, they were impacted quite a lot by the lockdowns and travel bans.
“What happened after that was that a lot of properties previously marketed for Airbnb were suddenly being placed en masse on property rental websites. There were suddenly hundreds, or indeed thousands of new properties being offered for short term or long term rent.
“Just looking at the decorations and furniture in the pictures of the flats on offer you could see that they were previously Airbnb properties. This had an effect of decreasing the average rental prices.
“What was interesting about this was that while the prices of properties for sale kept rising, the rents froze or even went down in places like Prague 1.
“For a short period of time, I think around April or May of 2020, you could find places for a very decent rent on top level addresses such as Peřížská street. Some of the people who owned these Airbnb properties either had to rent them out, put them on hold, even move into the apartment themselves, or sell it.”
One thing I noticed about the Expats Property Group is that you don’t just get investment queries, but also questions relating to upkeep, such as how to fix a wall, or who to contact for repairs. Did you notice something from these sorts of questions in regards to what expat property owners may struggle with in the Czech Republic?
“Yes and I would say that they struggle with the same things that Czechs such as myself struggle with as well. For example, finding reliable builders.
“This is where the beauty of social media and information sharing comes in. There can be queries such as: ‘I am in the area of Kladno and I need a reliable company to give me a price quote’.
“A lot of people from Kladno or Prague then answer and are happy to share their recommendations.
“When there is a company of bad repute, the members of the group are also happy to jump in and share their experiences.
“This is something that I believe works naturally. We don’t really moderate those sorts of comments. We do follow those posts that are reported, but I cannot really remember the last time I saw something [troublesome] in this matter.
“The most common questions are concerned with renovations. A mistake that group members can make in this regard is that they do not specify the location, which is very important for useful advice.”