Prague: Why should you invest?

20. 6. 2023

The real estate market has always been a safe market for financial investments both in times of economic growth and in times of recession. In fact, real estate has significantly lower volatility than other investments, and its value continues to grow over time.

Since May 2004, the Czech real estate market has been strengthened by the country’s accession to the European Union and has given foreigners the opportunity to own property directly.
In subsequent years, both rents and property prices rose rapidly and significantly, with rents rising at a slightly faster pace.
However, considering the effects of the coronavirus and pandemic in recent years, the new data on the consequences of the state of emergency have provided a clear view of the different areas of the country’s economy and society. What was recorded was a continuous increase in prices in the market of apartments, family houses, and land in the Czech Republic, with the largest increase in the price of apartments (7.3%) and a slightly lower increase in family homes (6.5%)according to the HB index.

It has also been shown that 20-30% of the properties used for rent in Prague are owned by foreigners. There has been a growth of people moving to the capital for work or residential purposes.

Who are the buyers?

Prague is an attractive capital for large international companies that want to expand. In fact, the real estate market in Prague is also extended to non-residents, which means they can buy real estate.
Listed below are the categories of people who can buy property in the Czech Republic without any restrictions:

Citizens of the Czech Republic
Legal persons established in the Czech Republic
Foreigners with a residence permit in the Czech Republic
People who have been granted asylum in the Czech Republic
EU citizens just need their passport when buying property in the Czech Republic

If you do not fall into one of these categories, the best choice is to turn to a real estate agency that will allow you to find the most suitable solution to get the investment.

How to find your property line?

Social media or online ads are one of the best ways to get a realistic view of the market.
If you do not have sufficient knowledge of the rules and procedures of the territory, it is advisable to rely on a real estate agent to find the most suitable offer. A good agent knows the legal pitfalls, the prices of housing in the area, and the best way to enter into a contract and a mortgage. Legal advice can be a great choice for long-term investments. Relying on a real estate agent in the Czech Republic is useful to ensure experience and expertise before signing a contract.

Conclude a contract – What do you need to know?

The contract is a document of primary importance. If the contract is in Czech, the presence of a professional translator can be useful. It is essential that every element of a contract is understood and analyzed before signing.
Once you find the property you want to buy, you usually need to sign a booking contract and pay a small deposit to keep the property out of the market for a short period of time. The conclusion of this contract also serves to thoroughly examine the property and the future contract of sale.
In some cases, it is necessary to enter into an additional preliminary purchase contract. This requires a larger deposit which corresponds to 10% – 30% of the total price. With this procedure, you can define all the conditions that must be met before the transfer of ownership. The cancellation conditions and the use of the security deposit are also defined.

The purchase process starts from the conclusion of the preliminary contract and ends with the signing of the sales contract. After signing the contract will be deposited at the Land Registry which will begin the acceptance and registration of the change of ownership.
Usually, the amount of the sale is deposited in a trust account and the passage of payment takes place only after the transcription of the change of ownership to the Cadastre.

Tax area

Considering, instead, of the tax field, you will need to pay a number of fees for the acquisition of the property, which will be added to the total cost of the property itself. In the Czech Republic, the transfer of ownership provided for the payment of a tax at a single rate of 4%. The taxable amount of the property was calculated on the so-called transaction value which may not even correspond to the selling price.
Since 2020, however, the new real estate tax calculation system has entered into force in Prague, and the transfer tax payment on real estate registered in the cadastre since December 2019 has been abolished.
The application for authorization for registration in the land register for a fee of about CZK 2,000 is active. If all the conditions for the registration of the transfer of property rights in the land register are met, the Land Register Office will authorize the registration at least 20 days after the sealing.
Finally, Czech law does not require the participation of legal professionals (lawyers, notaries) neither in the negotiation of the contract nor in the process of registering the property right in the real estate cadastre.