Czech Republic With its medieval towns and castles, sprawling forests and quaint country villages, the Czech Republic has been the focus of European property hunters for years, but the British are only just realising the potential. Although as a new nation and a fairly recent arrival on the scene, the Czech Republic is making a name for itself as one of the most developed and forward moving countries in Eastern Europe.

International flights only arrive into Prague, but flights are frequent thanks to the popularity of the capital as a weekend get-away. 

With almost magical cities of bridges, cathedrals, gold tipped towers and church domes it spends its days, and lively nights, admiring its picture perfect reflection mirrored in the surface of the Vltava River.

Non-residents, that are individuals not having permanent residence or owning legal entities headquartered in the Czech Republic, could purchase real estate in the Czech Republic even before the entry of the Czech Republic into the European Union. After the accession and particularly after the adoption of the last amendment to the Foreign Exchange Act, it has become much easier for foreigners and particularly for nationals of members states of the European Community to purchase real estate in the Czech Republic.

The Czech Republic in the EU including links to Czech government sites and Tourist Information.

Even though, under certain circumstances, property in the Czech Republic may be owned by anyone, it is not always so simple. While there are no limits imposed in this respect on a certain group of people, other cases may differ with regard to persons who want to acquire a Czech property and to the various property types.

The following categories of people can acquire property in the Czech Republic without any restriction:

  • Citizens of the Czech Republic;
  • Legal entities having their headquarters in the Czech Republic;
  • Foreigners with a permanent residence permit in the Czech Republic;
  • People who have been granted asylum in the Czech Republic.
  • Nationals of an EU member state who hold a residence permit for a member state of the European Community       
  • Nationals of other non EU states, solely in cases listed explicitly by the law, e.g. by inheritance, for the diplomatic mission of a state, from a relative, sibling or spouse, etc.
  • Legal entities that locate their enterprise or branch in the Czech Republic and are authorised to do business here, otherwise solely under the same conditions as people who are not nationals of a member state of the European Union.

The Czech Property Market: Since gaining its independent, the Czech Republic has experienced a boom in the number of foreign investors who have become active in the property market. More and more foreign nationals, mainly from the EU but also from many other nations, are getting involved in the property market in the Czech Republic.

Thousands of foreign nationals have invested in commercial property market in the Czech Republic. The government has worked to streamline the laws in the Czech Republic that deal with foreign property ownership. There still remain some hurdles to foreign ownership of property, particularly for foreign nationals from non-EU countries, these are hardly are insurmountable today. In addition, there are proposals that will remove many of the remaining hurdles to foreign ownership within the coming decade. But, that said, any of the hurdles that remain in place today are far from insurmountable.

Currently experiencing a steady annual rise in property price’s and one trhat is predicted to continue, the property market in the Czech Republic is mostly centred in and around Prague, although there is great potential for capital growth in many of the smaller towns such as Brno, Karlovy Vary or Ceske Budejovice. Overall, property prices have increased by 13 per cent each year for the last few years, and the upward trend is expected to continue.  Property prices need some time to catch up with their western counterparts.  Currently, for under 50,000€ you could buy a one bedroom apartment in the center of Prague, or a modern one bedroom house in Brno or any countryside house for 51,000 to 100,000€.

Residential Properties: Within the Czech Republic are many properties and estates with long histories. In recent years, many of these large residences have been put on the market for sale. Many foreign nationals have taken an interest in buying these properties for two reasons. First, these foreign investors have taken to purchasing these properties for use as their own second or holiday residences.

In addition to buying these properties for their personal uses, some foreign nationals are also buying these properties to convert them into inns or bed and breakfasts that are being used in the ever growing tourist trade.

Apartments: For many years, apartments have been the primary residences for many people who reside in some of the more major cities and urban areas. This has not changed significantly in recent years.

Since the entry of the Czech Republic into the European Union, more and more foreign nationals have been spending extended periods of time in the Czech Republic for business purposes. In this regard, many foreign nationals have taken to purchasing apartments in the major urban and commercial centers in the Czech Republic for their own residential purposes while they are in the Czech Republic on business.

A growing number of foreign nationals, from the EU and from other nations are buying apartment units and buildings for investment purposes. These people are in turn renting these units to other people, generally foreign nationals who are in the country for business purposes. Industry analysts maintain that this trend is likely to continue well into the next decade as more and more foreign nationals are spending time in the country.

Holiday Property: People who are interested in investing in are surprised to learn that the holiday property market is booming. The Czech Republic has become a major destination for tourists from across Europe and, indeed, from many other countries around the world.

Whilst the increase in tourism since the country gained its independence, there has been a similar increase in the development and remodeling of different properties that are being used by tourists and visitors to the country. For example, a significant number of apartment developments have been constructed with the goal of providing living space to men and women who intend to visit the Czech Republic for extended stays.

In addition to apartments, other holiday properties including hotels and single family residences are being developed, constructed and refurbished to provide living space for people who are interested in traveling to the Czech Republic for holiday purposes. Foreign nationals are highly involved in this type of property development.

Mortgage/Loans: When considering the options for a mortgage on your intended property purchase there are a couple of choices to consider;

Do you raise the finance on one of your existing properties in the UK to cover the whole cost of your purchase abroad? A good idea if the interest rate in the country in question is a lot higher than it is here in the UK as you will pay a lot less in monthly repayments.

Do you secure a mortgage against the property from a local bank in the country of purchase? This can be a wise option especially if the interest rate is lower than our current UK interest rate. Most overseas mortgage / lenders will require up to 30% deposit on mortgages. However, you will need to give some thought to how you will service your mortgage payments each month especially if you are not living or earning in that country as you may well lose out on exchanging money each time to cover monthly expenses.

The Buying Process: It is an absolute must that you secure the services of a lawyer from the outset when considering making an investment into property in the Czech Republic. This is because the majority of the documentation associated with the transaction will be written in Czech and it is also because you really need someone to ensure your legal rights and personal interests are looked after in a country where sadly ‘rich investors’ are occasionally seen as a fair target for unfair practice.

When a property investor is ready to purchase and has legal representation in place and has established whether or not forming a limited liability company is a necessity, it is time to source suitable properties to meet investment objectives.  At this stage many will simply employ the services of an estate agent, but please note that estate agencies in the Czech Republic are not necessarily regulated or licensed and that estate agents need have no skills or experience to represent a property buyer or vendor.  Having said that many of the long established companies operating from Prague in particular are reputable and well worth their fees!

Once a property has been located the buyer should check whether it is being sold OV or DV...OV is private ownership and DV is cooperative ownership and usually applies to apartments in old apartment blocks.  Ideally the property should be OV and free of any debts or mortgages and an offer for it can be made to the vendor either directly or via the agent or lawyer.  If an offer is accepted it is sometimes necessary to submit a holding deposit which can be held in an escrow until the purchase contract is ready to be signed.

Before any contacts are signed it is necessary to check that the vendor has the right to sell the property and that its title is clean of any debts or issues. The buyer’s lawyer should conduct searches at the Kadastral which is the central registry of property ownership located in Prague and also do due diligence on the property to ensure it is legally available for sale.  At this stage a property investor can have an independent structural survey done on the property as well.

Once everything has been checked and found to be satisfactory the purchase contract can be drawn up and signed and notarized.  Upon signing the contract the buyer does not become the legal owner of the property - this only happens after the contract and relevant documentation have been lodged with the Land Registry office and this whole process has been known to take several months.  It is usual therefore for a buyer to lodge the final funds for the purchase price in either a notarial or escrow account until the sale is legalized and complete, only then will funds and deeds be transferred.

Fees and Taxes: In terms of additional fees associated with the property purchase in the Czech Republic buyers should allocate at least an additional 8% of the purchase prices for taxes and fees.  The property transfer tax should be paid by the vendor but the buyer will become liable for it if the vendor fails to pay it.  There are also annual property taxes to consider and anyone with an SRO will have to pay annual maintenance costs to cover accountancy, tax filing as well as registered office rental, and corporate taxation will be due on net taxable income although many expenses can be claimed against this to reduce or negate liability.

Map of Czech Republic

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Disclaimer: This guide is for information only and should not be relied upon as definitive. Details have been obtained from various sources and although we have done everything possible to ensure that it is correct, we cannot accept responsibility for it or guarantee its accuracy. This is because processes and laws change frequently, and may also vary dependant upon personal circumstances. You are welcome to use the information provided, but should always obtain confirmation of specific details and get independent specialist and legal advice in the country that the information refers to.

05-11-2009