The Prague property market (should you buy or sell?) – good & bad perspectives

The Prague (and to some extent the whole Czech) property market is growing well, which raises interesting strategy issues for both buyers and sellers – whether it’s good or bad just depends on your perspective (like so many things in life).

When thinking about what to do next, buyers and sellers have to consider some of the following factors:

As the market is rising when is the best time to buy or sell?

If you’re trying to buy you’re probably finding that the market is running away from you and it’s better to buy something today than delay the decision and have to pay an extra 10% later in the year for the same place.

As a seller you want to get the maximum sale price (assuming you have no other time restrictions such as a mortgage refixation date or tenant to consider), and thus you have to judge how much longer the market will increase and how quickly demand could drop off if the market changes.

How will the currency change over the coming months?

It is likely by the end of 2016 the Czech crown will strengthen (the Czech national bank will soon end intervention into the Crown’s pricing) meaning whatever your net proceeds from the sale will be worth more in your local currency when sent home, or as a buyer your deposit monies will not go as far. So for buyers it again makes sense to buy sooner rather than later and for sellers it may be worth waiting a little longer.

How will the mortgage market change over the coming months?

Already on 1^st Dec 2016 with the new consumer credit laws being introduced the interest rate on many new mortgages as risen (0.2-0.5%), it remains to be seen how this will dampen demand and if rates will rise further. We believe the mortgage rates will still stay relatively low and competition between banks will keep terms competitive for clients for the time being.

Will the economy still continue to grow?

The Czech economy is performing well. The population is rising slightly and critically salaries are rising and unemployment is very low. The net effect of all of this is people have more money than they did and the higher salaries allow them to access more favourable mortgage terms. This all points to demand for properties continuing to be strong for the foreseeable future.

Are there supply issues?

Despite the new developments being built, the supply of properties has gone down over the last year. Due to the high demand it is likely that this trend will continue.

What if there is a tenant in the property?

If you’re an investment buyer (or selling to an investment buyer) it can be an advantage to have a tenant in and thus both sides suffer no void period. If you’re selling and you have a tenant with a long term contract its usually necessary to solve this between all parties during the process, in the vast majority of cases we are able to come to a reasonable solution and thus having a tenant in the property doesn’t significantly complicated the sales process.

 

Summary

If you are a buyer, it’s not a very comfortable position to be in. There is a very large demand (both domestic and foreign) and anything reasonably priced is sold very quickly. Here at Sim Property we are literally swamped with demand from buyers. We recommend buyers do their homework in advance so they can make decisions quickly when the right property comes along, and to have pre-arranged mortgage finance in place to help smooth the purchase process (as sellers often can choose between multiple buyers).

If you’re a seller, you’re in a favourable position whereby you can sell your property today at a good price or continue to wait and see how the market develops. If you are flexible and don’t need the money quickly, if you keep your ear to the ground it may be possible to exit the investment towards the top of the market before it starts to turn again (which it inevitably will at some stage).

Everyone’s situation (and property) is different so please contact us for more detailed advice on how best to time the market if you’re considering selling.