With the entry of the Czech Republic into the European Union (May 2004) all restrictions on buying real estate were lifted for EU citizens. However, buying real estate in the Czech Republic requires a well planned and guided approach as it contains both opportunities and pitfalls.
There are many factors that have contributed to the growth of the Czech property market. The accession to the EU is the main factor since it provided access to a formerly isolated market. The Czech Republic’s location in the centre of Europe along with its strong economic performance further boost the market's attractiveness. Furthermore, due to rent regulations, the demand for high quality properties far exceeds supply.
The Czech standard of living is the highest of all Eastern European EU members and it almost touches that of its Western European neighbours, such as Austria and Germany. This is due in part to the huge infrastructure investments undertaken by the Czech government.
House prices had already doubled within the three years before EU accession. With the increase of the VAT on construction work, from 5% to 19%, on January 1st 2008, the demand for existing housing increased greatly.
However, land and property prices are only about 20% of what you would expect to pay in Western Europe, with the exception of Prague. For all of these reasons the Czech property market is very attractive to foreign investors.
In 2008, the effects of the global economic crisis hit the Czech Republic. Residential property prices fell, with the average price of flats falling around 7%. The number of apartments sold declined by 38% in 2008 compared to the previous year.
Prague is the most popular place for foreigners to invest in property. It is the leading industrial centre of the Czech Republic and attracts more than three million tourists every year. Therefore house prices here are a lot higher than elsewhere in the country and easily reach the level of Western European cities.
If you look for lower priced investments there are several attractive alternative areas. Many Czechs have their holiday homes in Liberec or Jablonec because of the cities' impressive architecture and the spectacular countryside.
Other areas, such as the Brno region, also offer reasonable investment opportunities. The region Moravia's capital is an important business location hosting a vibrant community of professionals and expatriates.