Real estate in Prague – an alternative to investment in real estate in Moscow?
According to the results of recent years, the Czech Republic is steadily among the ten countries in Europe that are in demand among real estate investors. And it is Russian investors who take a large market share, who consider buying an apartment in the Czech Republic, and in particular in Prague, a promising and profitable investment.
Demand for rent is stable, access threshold is affordable, the rights of owners are well protected by law, the country’s economy is not a concern. All this allows us to confidently talk about buying property in Prague as a good investment option in foreign real estate.
What real estate can foreigners buy in the Czech Republic?
There are no legislative restrictions on the purchase of both commercial and residential real estate in the country. From commercial real estate, office, warehouse and retail premises, restaurants, and hotels are available for purchase. But the greatest demand is for residential real estate in Prague.
The following categories of residential real estate are in demand among investors in Prague:
Apartments under construction LCD. It is most advantageous to purchase apartments of 25-30 square meters. m. Such facilities fit into the amount of up to 100 thousand euros. When buying, a scheme convenient for the investor is used: at the conclusion of the contract, only 20% of the cost of housing is paid, the rest is transferred to the developer after the object is commissioned. An apartment purchased in this way can be leased, earning an income of 5-7% per annum or resold after a few years with a profit.
Ready apartment in a modern new building. The entry threshold compared to the previous version is slightly higher and amounts to about 120 thousand euros for a similar object. In addition, you need to immediately pay the full price of the apartment and related costs. The advantage of this option is that you can immediately make a profit by renting an object for a long term or daily.
The apartment is on the secondary. In this case, it is better to give preference to objects located in the central part of the city, in historical buildings. Prices for such apartments start from 140 thousand euros.
Costs for the acquisition, maintenance and sale of real estate in Prague
When calculating the return on investment, it is necessary to take into account not only the estimated income, but also the costs associated with the purchase and ownership of real estate.
When selling property in the Czech Republic, a 4% tax is imposed. But historically, it is that in the vast majority of cases the buyer pays for it, this is recorded in the DCT.
The commission of a foreign representative helping to select an object and accompanying the transaction will be from 3 to 5%.
Property Maintenance Costs
Property ownership includes the following expenses:
Utility bills (on average 30 kroons per month to the house fund, common house expenses from 50 kroons, other utilities – electricity, water, gas). Fees to the house-building fund depend on the age of the house (the older it is, the more expenses), footage, infrastructure of the house territory, additional services.
The annual real estate tax in Prague is approximately 12-15 crowns per square meter. Compared to other regions of the country, it is maximum.
If the apartment is rented out, the management company deals with all issues. The commission is 10% of the rental price. When renting an apartment, all utilities are borne by the tenants. The owner is obliged to pay only income tax in the amount of 15%. In some cases, investors are exempted from taxes (if the annual income is less than 166 thousand crowns), but a declaration must be provided.
Costs of the sale of the object
When selling an apartment, you will need to pay the following taxes:
Sales tax – 4%.
Agency services – 3-5%.
Personal income tax – 15% (on the difference of the purchase / sale).
There are legal schemes to avoid taxation when selling an apartment. To do this, the following conditions must be met:
Sales tax is the buyer’s responsibility.
Sell the apartment yourself or charge the buyer with the services of an intermediary.
Personal income tax is not paid in case of living in an apartment for more than 2 years or a tenure of more than 5 years without living, if a new property was bought in exchange for the sold property before the end of the current year.
Given all the economic factors, we can conclude that the greatest benefit from investment in Czech real estate is obtained by buying an apartment in Prague for rent. High demand, acceptable profitability, low real estate tax, the availability of profitable mortgages for foreigners – all this makes buying an apartment in Prague a reliable and profitable investment of available funds.