From Sand and Sea to Spires & Suburbs

In a complete departure from the sun, sea and sand that we normally associate with overseas property investment, Id like to get you considering overseas

[caption id="" align="alignright" width="299" caption="Czech Republic & Prague Location"]

Czech Republic - From Sand and Sea to Spires & Suburbs

investments in the same way we might evaluate any buy-to-let in the UK. In other words, a property purchased for long-term let to people who will make it their home and pay you rent to cover your mortgage, providing you with cash flow. Of course, were also looking for capital growth.

What we need is a location with a very strong rental demand, a stable government, growing economy and tax advantages. We also need to be able to obtain mortgages (we still want to invest using other peoples money) at reasonable rates.

So come with me now to the Czech Republic… where residential property investment is currently considered by many to offer one of the safest investment opportunities in Central and Eastern Europe.

Investment Factors

The Czech market today offers attractive investment opportunities in the residential sector due to the following factors:

• Central location in Europe

• Property prices growing over 20% every year

• European Union membership

• Shortage of quality rental properties

• Strong local rental market

• Highly Educated & skilled workforce

• Low labour costs

• Inflow of foreign direct investment

• No Capital Gains Tax after 5 years

Economic Factors

The Czech Republic is the most stable and prosperous of the post-communist states and its economy has grown steadily over the years with the standard of living increasing substantially.

Having recovered from a slight slowdown caused by the worldwide recession at the turn of the millennium, GDP growth soared above 6%, one of the highest levels among European countries, while inflation remained low and unemployment decreased.

Business & Political Climate

This healthy, export-driven growth was enabled by the countrys supportive business and investment climate. The Czech Republic has a fully fledged parliamentary democracy and is one of the most progressive new EU members with a consistent and predictable economic policy. Tourism continues to fuel growth and as tourist figures have increased so has foreign investment in property.

Currently 90% of tourism into the Czech Republic is directed at Prague and the surrounding areas. As awareness and interest in the country continues to increase, new markets have begun to open and foreign purchase of property is set to rise.

Although the Czech Republic only has 10 million inhabitants, its income level is among the highest in the region. Economic growth has been driven, in particular, by high levels of Foreign Direct Investment (FDI), domestic consumer spending and Czech exports. Per capita, the Czech Republic receives more FDI than any other Central and Eastern European country, and in absolute terms is second only to Poland.

Location Advantages

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The Czech Republic has a strategic location in the geographical heart of Europe making it extremely accessible from both the established western markets and emerging eastern markets. Some 70% of trade is with the EU, notably Germany, itself recognized as one of the most stable economies during these recent recessionary times.

The extensive transport and rail infrastructure (with proposed further investments by the government) highlights the Czech Republic as a crossroads of major European transit corridors. Now that the Czech Republic is part of the European Union, prospective foreign investors recognize that locating bases here places them in an excellent position to serve the worlds most populated markets.

Rental Market

Rental contracts in the Czech Republic very much favour the landlord. For example, a non-paying tenant can be evicted without the need for court proceedings, the vast majority of lettings are unfurnished and when a tenant is in situ, it is they who pay the service charges on the property rather than the landlord/owner.

Capital Growth & Resale

Whilst the rental market is thriving, with only 4% of Czechs having a mortgage, more and more of the local residents are starting to purchase property. The aspirations of young, upwardly mobile individuals to own property is driving prices higher and creating a strong resale market for investors who buy off-plan. All property in The Czech Republic is freehold and Capital growth rates have reached up to 25% in some parts over the last year. There is now potential for even higher capital appreciation as the traditionally strong Czech property market is at the beginning of an upswing.

Capital gains tax is payable on resale, but the rate is only 12.5%, decreasing to zero after 5 years of ownership.

Mortgage Availability

Mortgage finance – which can be up to 90% loan to value - is readily available in the Czech Republic, the interest rates are extremely competitive at between 4.5% & 6%. Obtaining finance is still relatively easy and this fact alone makes investment here very attractive because financing has been tightened up in many other markets.

Up & Coming Suburbs

Just as with any capital city, not everyone who works in central Prague, wants to live in central Prague. The key is to look for value in the commuter belt.

Beroun is an upcoming suburb of the Czech Republic, Prague. Its one of the most desirable and sought after places to live in the region with excellent access to central Prague. Beroun is located approximately 20km from the very well connected Prague airport.

In addition, Beroun has been voted the "no. 1 Leisure & Lifestyle City" in the Czech Republic. The current population of 25,000 is growing at 5% per annum with an increasing number of graduates, young couple and families choosing to live in Beroun and commute to Prague for work, taking advantage of the fantastic transport links and low cost of living. A new typer-speed train link into Prague as been approved which will make the journey time between Beroun and Prague only 18 minutes.

Beroun is a picturesque market town with several tourist attractions. There is beautiful architecture and several sights of interest including the Koneprusy caves and Karlstein Castle. The suburb also has a recently opened 18 hole Championship Golf Course and new Aqua Park with a championship sized swimming pool.

New Development Investment Opportunities

A UK Developer is offering off-plan purchases in one particular development in Beroun, already with full planning permission. It offers an opportunity to get in at grass roots level either as an equity investor in the project OR to purchase individual properties with gifted deposits and rental guarantees.

Individual units can currently be purchased from under £100,000 with 85% mortgages available and a 15% gifted deposit, making this a no money down offering, aside from the low acquisition costs. Units range from studio apartments to three bedroom houses. There is a 7% rental guarantee on offer for the first two years and this will cover the mortgage.

Perhaps the best part is that individual investors can currently purchase for only £2,500 to cover acquisition costs with the 15% deposit paid by the UK developer, resulting in approximately a 30% return on your £2,500 capital after mortgage payments. Of course, this is purely on the rental and doesnt consider the capital growth, expected to continue at around 20% per annum.

Equity Investment Opportunity

If youve got ten times this amount to invest, you could consider becoming an equity investor. Equity investors enter at the top level with a minimum £25,000 secured against the prime residential land that already has full planning consent.

Equity investors earn a preferred return of 8% per annum on their invested funds, plus a 50% share of net profits. This results in an internal rate of return (IRR) of 36.87%.

Finding Out More

For further information, contact This email address is being protected from spambots. You need JavaScript enabled to view it. or if you would like to ask Maria a question click

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