Empty short-term rentals and record-low mortgages create prime conditions for Prague apartment hunters

The turbulent real estate market offers some key advantages for those interested in buying a home or flat in the Czech Republic

Expats.cz

Written by Expats.cz
Published on 15.10.2020 16:29 (updated on 16.10.2020)

Like most areas of the economy, the COVID-19 epidemic in the Czech Republic has dramatically affected the local real estate market. But savvy buyers could turn that to their advantage: as mortgage rates plummet and new and interesting properties hit the market, now might be the perfect time to buy a new home.

"Eighty percent of the population bought flats in the 90s and now, due to the crisis, are selling them at some of the lowest prices in the last 10 years," says Jakub Konig, licensed mortgage and insurance broker for Prague Lux. He says the the crisis has a psychological impact on apartment owners, many of whom are willing to negotiate.

The turbulent changes in the market, however, can be difficult to keep up with while banks are now scrutinizing foreign mortgage applicants. So how can potential homeowners take advantage of a buyer's market in the current atmosphere?

The current situation on the market

Since April of this year, local mortgage rates have seen a steady decline, falling for five months in a row and nearing all-time records. The average mortgage in the Czech Republic in September was down to 2.09%, according to Konig, dropping between four and nine basis points in each of the previous five months.

In addition to the COVID-19 epidemic resulting in some record-low mortgage rates in the Czech Republic, the crisis has also resulted in another unique opportunity, particularly in central Prague.

Properties to invest in -- now

In August, despite the COVID-19 epidemic, buyers set a new monthly record in the total amount of mortgages taken out with Czech banks.

Interest in family homes and cottages took of this summer, though prices for these types of properties have largely remained stable. But a unique opportunity presents itself in apartments once purchased as short-term Airbnb accommodation which have now hit the Prague real estate market at advantageous prices.

1-bedroom in Prague's Vršovice district / photo Prague Lux
1-bedroom in Prague's Vršovice district / photo Prague Lux

These types of apartments make an excellent buying opportunity for investors looking for a rebound in the market or those looking to live in the center of the city, and can now be bought at a discount of percentages in the double digits, after years of skyrocketing prices.

Konig gives as an example a 1-bedroom in Prague's sought-after Vršovice district now on the market for 5.5 million CZK.

Current challenges for foreigners

For foreigners residing in the Czech Republic, however, getting a mortgage can be complicated. While not an impossible task, it's highly beneficial to have a licensed broker to help negotiate with local banks.

"Foreigners have to prove to the bank not only that they will live here but that they have a motivation to live here," says Konig. "Banks are not real estate companies, they want someone who's going to pay them for 20 years."

1-bedroom in Prague's Vršovice district / photo Prague Lux
1-bedroom in Prague's Vršovice district / photo Prague Lux

While foreigners are generally required to have some form of residence in the Czech Republic, be it temporary, long-term, or permanent, each bank will have different criteria when assessing a potential mortgage for non-Czech citizens.

Additionally, local banks have reacted at different times to the turbulent changes in this year's real estate market. After the Czech National Bank reduced the National Interest to 0.25% this summer, many smaller banks quickly lowered their mortgage rates to attract potential buyers.

Why a mortgage broker matters

It helps to have an experienced local broker, knowledgeable in differences between Czecg banks and requirements for foreigners, to navigate the process. Konig and the team at Prague Lux speak English, making them a popular choice for expats and foreigners investing in the Czech Republic.

While the COVID-19 epidemic has made for a great time to buy property in the Czech Republic and especially Prague, the situation won't last forever.

"I expect the situation to stay this way for at least another year," say Konig who believes that the market will eventually correct itself, making now the right time to act for those who want to find the perfect location and secure a mortgage from a Czech bank.

This article was written in association with Prague Lux. Read here for more information about our partner content policies.