Gardens below Prague Castle

Apartment houses in Czech republic

Interest in Prague apartment houses is booming. New investors are coming mainly from Austria, France, Spain, Germany and Israel. At this moment most apartment houses that were on the market for some years are now sold. And not many are coming on the market these days. Their price has grown last couple of years very significantly.

Prevailing part of privately owned houses in Prague is owned by companies established with the sole purpose of purchasing real estate. When such a company is sold, no "property transfer tax" is paid. Tax from real estate sale has to be paid only if there is a change of owner recorded in the land register. If shares in company owning the property are sold, there is no change in the land register and therefore no tax on sale is charged. If we take aside the apartment houses that are owned by organisations of individual apartment owners, then nearly one third of apartment houses in Prague are owned by Italians, and they all have registered their houses on these "special purpose vehicle" companies. While in the past Italians were the main buyers of apartment houses, now they are the main sellers, among other due to economic difficulties they experience at home in Italy.

Starting from this year the "property transfer tax" is paid by the buyer. Up till now it used to be paid by the seller. If you are consindering to purchase commercial property like office building, apartment house or some other commercial space it is probably better to do it now, they might introduce property transfer tax even on the property owned by special purpose companies.

Todays buyers of the apartment blocks have two main investment strategies. Some of them refurbish the buildings fully and rent out the apartments to individual tenants. Others sell the apartments one by one, sometimes even without refurbishing them. They just make a new roof, new facade, entrance hall and corridors. And let the new apartment owners do the rest.

Several international companies are buying houses in city centre. They build there exclusive apartments that they later sell for some 8000 euro per square meter. Czechs mainly buy houses with 10 to 14 flats for price up till 1.2 mil euro. The most profitable investments were so far into houses in Prague 1, especially those that had commercial premises on the street level. Some places in Prague 1 the rent for these premises reaches 120 euro per square meter per month. But prices of the buildings in Prague 1 have risen so sharply that it is questionable whether it makes economic sense any more to buy the houses there expecting profit. Now the interest of investors is shifting towards wider center of Prague.

Copyright © Roman Hronek