Czech kitchens for property investors

I had a client contact me yesterday who had been charged 437,000 CZK for a small-sized kitchen in a mid-level development. Either the kitchen was made out of pure gold studded with diamonds or the company charging him this amount was make a healthy margin.

I don't deny that property companies have to make a profit for the work they do in designing and installing a kitchen in an investors' property.

However, what I do find questionable is:
(1) charging huge prices and telling investors that such a high standard kitchen is required, when in most cases it is not
(2) once the investor has paid for the kitchen the property company then puts in the cheapest quality materials as possible to make as much money as possible, usually with the idea that the investor doesn't really know the difference and if they do they will probably never come to the Czech Republic to see it anyway. This kind of practice is widespread an immoral.

We have recently been selling a property in a well known development in Prague 7. This investor had gone for the best quality kitchen the property company was offering, and paid over 250,000 CZK for the privilege. When we viewed the apartment the potential buyer said he would have to remove the kitchen if ever he were to buy it as it was so low quality. The cheapest materials had been used for the work surfaces and cupboards, and even plastic handles were installed - all this for 250,000 CZK!!!

Unfortunately, this is not an isolated case and is just another part of the corrupt world of property companies ripping off unsuspecting investors.

So any investors out there who need a kitchen make sure you know what quality spec you're signing up for and shop around for a quote, then hold the property company to account that what you bought was actually installed.

[the image in this blog is one example of the cheap and nasty kitchen installed in some apartments - not integrated fridge/freezer, not many cupboards, poor quality appliances, all round low quality]

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Czech Resale Property

One of the effects of the credit crisis has been we have seen a large increase in the numbers of investors who wish to resell their Czech property.

The Czech Resale Market

Throughout 2008 (though in particular the second half of the year) Czech property prices have slowed down from the heady growth of the previous couple of years.

Developers have had problems with their financing and combined with slowing demand on the Czech market have seen them slash prices in order to increase their sales.

Developers have been offering various discounts (up to around 10% off) and incentives such as free kitchens, free parking spaces or cash back etc etc.

Thus prices for new build property have seen some decline and this trend is only likely to continue.

Panelak prices have also seen falls as sellers have to price their properties more realistically.

Demand for Czech property has for sure dropped and with the economic outlook worsening in the Czech Republic (a country that is heavily dependent on exports - particularly to Germany that has just gone into recession) the outlook for 2009 is not pretty. I expect prices to soften further.

Many investors are seeing this as a good time to sell before the situation gets much worse and whislt the GBP/CZK exchange rate is favourable (giving around a 30-40% gain on the currency alone for investors).

How can PII help?

We are lucky to have, in our group of companies, our own local Czech real estate agency (which is a completely separate brand from Property Investment International).

We put all our resale property through our Czech agency and the results have been impressive.

We are getting investors a great price and a quick and hassle free sale (we do all the paperwork as part of the service).

For anyone interested in selling their Czech property don't hesitate to contact us to find out more about how our resale service can help.

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Czech & Polish Property Management

As part of our newly introduced "price promise" we have just reduced our rates on our Czech & Polish property management services.

Our Czech property management service now just costs a crazyily low 9% of the monthly rent (+VAT) making it the cheapest property management service on the Czech property market.

Not only is our Czech property management service the cheapest on the market we believe it is also the best.

Our service is completely hands-off, which is quite unusual on the Czech market. Allow me to explain ...

Most Czech property management services still require you to check that you've received the rent every month, pay your own community charges and pay all other utility bills (such as electricity) and deal with all the paperwork involved in running a property - we, however, do all this for you!

This effectively means that, after the initial set-up of the service, all you have to do as an investor is sit back and watch the money come into your bank account every month and take a look at our regular property management statement report should you wish to.

We keep a detailed log of all incoming and outgoing related to your property so that you can see exactly what is going on every month and makes any tax payments a straightforward proceedure.

Our head office is based in Prague giving us vital on the ground presence, knowledge and expertise. We have a great team in place who sort out any problems immediately and answer investors queries promptly.

We also provide the same property management services in Poland.

Simply contact us to give our property management service a try.

Prague Property Management Czech Republic

Our property management service in Prague (Czech Republic) is proving extremely popular.

Now that there are a number of new off-plan developments completing in 2008 demand for a cost effective property management service in Prague and other cities in the Czech Republic such as Brno, Ostrava and Hradec Kralove is very high.

We only charge 10% + VAT of the rent per month for a complete hands-off service where we look after all aspects of managing the property even including making sure all the necessary bills and service charges are paid and all communication with the tenant not to mention monthly accountancy.

We are the lowest cost provider on the Czech market for property management, yet we deliver the highest level of service a one which is truely hands-off - all you have to do is check your report which we send you once a month.

As well as property management our local Czech real estate agency facilitates all the lettings and resales, thus providing a complete packages of property services for investors in Prague and the Czech Republic.

Please get in touch if you have a property in Prague or other cities in the Czech Republic to find out more about our unique Czech property management service.

www.propertyinvestmentinternational.com

EU Cards in Czech Republic

We have long been the cheapest provider on the market aiding foreigner property investors to get EU cards in the Czech Republic.

However, is soon expected (ie early 2009) that the Czech Republic, after a 5 year grace period, will comply with the EU regulations and remove the necessity for foreigners to obtain an EU card or set up a company to be able to buy property in the Czech Republic.

This will mean even cheaper transaction costs and less hassle when buying property in the Czech Republic, hence it is a good thing.

The restrictions on foreigners owning Czech agricultural land will remain place for another 2 years however.

Theoretically, if the restrictions are scrapped, only foreign property investors completely on off-plan units in the next few months will need an EU card. If you find yourself in this position please contact us for more information.

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Which countries in Central & Eastern Europe could be most affected by the Credit Crisis

Iceland's economic and banking woes have been splashed all across the news in the last couple of weeks, and quite rightly too as the situation is a mess (but a great/cheap opportunity to travel there as their currency has been hammered).

In light of the crisis in Iceland I thought I'd take a look at which countries in Central and Eastern Europe are the most at risk in going the same way, and thus which property markets you may want to avoid.

Starting with the worst first, in order:
1. The Baltics (Estonia, Latvia and Lithuania)
2. Hungary
3. Romania
4. Bulgaria

The Baltics in particular have had a huge property bubble that has been busting for a while now, the banks have tried to tighten up lending but they've been a little late and their actions have only speeded up the demise of the housing market. These are small and vunerable economies that have grown too quickly over the last 5 years and have not done enough to temper and sustain some of this growth.

Hungary has been a mess for a while, their economy just never did perform as well as some of their neighbours and the political malaise does not help. The Hungarian property market has not even seen some of the price growth that the Baltics countries have, and has poor mortgage finance for foreigners. Much of the nations mortgage borrowing has been in Swiss Francs leading to huge currency risks that could see people unable to afford their repayments if the exchange swing against them. Only recently has the Hungary started to impose restricts on this kind of lending, again too late.

Romania is another candidate for an economic mess. High, but unsustainable, growth and wild policies by the government that has tried to grow the economy too quickly. This has led to huge risks that the economy could falter. Mortgage lending to foreigners has never been very good and now has been stopped by the national bank pending a review. Romania is not a place I'd want to invest at the moment.

Bulgaria follows similar lines to Romania, though perhaps not as accute. Though their banks have only just recently started to tighten up their lending practices on the heavily over-inflated priced property on the beach and in the ski resorts. Time will tell as to how their banking sector will fair.

The other country I might mention in this list would be Ukraine, whilst not in the EU there are still similar banking and property sector risks as described above.

The Czech Republic, Poland and Slovakia should fair a lot better. Although I see their economic growth rates slowing, both their economies and property markets are more robust.

The world is definitely changing and no-one really knows how things will develop over the next year, but one thing is for sure now is a good time to have money in safe solid assets and cash ready for the opportunities that will abound when the world once again settles down.

www.propertyinvestmentinternational.com

Czech vs UK property shows

Exactly two of weeks ago I attended a property exhibition here in Prague called ForArch.

The ForArch exhition was a combination of property for sale, furniture, kitchens, fires, building materials and so on, and took place in the new exhibition halls in Letnany, Prague, where there is a new stop on the metro line C.

What really struck me was not that it was slightly different from a UK property show but that the place was absolutely packed full of people (and this was on a Friday morning!). It was so busy it was almost annoying.

This is in sharp contrast to the recent property shows in the UK which have either been cancelled or, like this years Property Investor Show, a complete disaster due to such a low turn out.

I'm not suggesting you should invest in a certain market just because how busy their respective property shows are but it does give an interesting indication of the relative demand for property today in the two countries.

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Letting Czech property a busy task in September 2008 especially to foreigners

We have had an incredibly busy month renting out property for clients in the Czech Republic.

September is traditionally a busy rental month when people come back from their summer holidays and students are hunting for accommodation - and September 2008 has proved no exception.

Demand for renting property in Prague and the Czech Republic still remains healthy.

I have even managed to increase rents recently on some of my properties which are in better locations - perhaps a sign that prices in the Czech rental market will see some more growth in the future (especially given inflation and wages are rising around 7-8% per annum).

Overall, I still think the rental market will be fairly static for another year and in areas which are suffering from oversupply prices will soften. That said the Czech rental market is still in good condition.

At Property Investment International we have rental/lease contracts in both Czech and English to cater for the range of nationalities in Prague.

Recently, we seem to have been using around 80% of our rental contracts in English.

As well as tenants from England and the United States our recent range of nationalities have included Norwegian, Swedish, Finnish, Turkish, Saudia Arabian, Korean, Russian, Slovak, Greek and Spanish to name but a few.

Which just goes to show how the Czech Republic (and Prague in particular) still seems to draw a huge range of people, from students and tourists to international business men.

All of which can only have a positive affect on the Czech property market and the Czech economy.

Next month Property Investment International will also be launching a new redesigned website for our local real estate agency brand, which will further help us facilitate lettings and resales in the Czech Republic and keep our hardworking team even busier :).

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czech property news september

A taster of some Czech property news in September:

Erste: Czech Republic is safe real estate harbour

The bank group Erste in its survey of Central European real estate companies stated the Czech Republic along with other Central and Eastern European countries is still a safe place for property investments. In contradiction to countries of a former Soviet Union and Western European countries, the commercial property market in the region will slow down but not stop.

Interest in luxury apartments still growing

According to the Czech News Agency, interest in the luxurious apartment segment is still strong and growing. The real estate company Engel & Volkers announced a 21% increase of interest in the expensive flats segment. Also, the development company Satpo Development revealed that for the first eight months of this year they have recorded an increase of residential units sold in range of several tens of percents.

Crisis pushes down demand of new flats

The real estate crisis which has already reduced demand for overpriced prefab flats, is now affecting the market for some new flats. In order to boost stagnant sales, developers with inferior projects have started to offer discounts or financial bonuses to buy equipment. The companies offer discounts ranging from CZK 50,000 to CZK 150,000 on kitchen equipment, or a free parking space in a garage, worth up to CZK 300,000. Customers are more demanding and selective in what they will accept. They consider the price, quality, location, architectural concept and other such factors. Overpriced, low-quality projects of poor architecture design can be found in some less desirable locations, and the times when customers would buy almost anything are gone.

Mortgage market update

The first half of the year showed a 20% y-o-y decrease in total amount of total mortgage loans in the Czech Republic. After the record years 2006 and 2007 when people borrowed 100 billion CZK and then 140 billion CZK, a the expected decrease in mortgage volumes has taken hold. However this year’s 60 billion CZK loans show the actual demand for an own flat is still strong. Moreover thanks to the recent cut in interest rates the volume of mortgages is slowly increasing. All told, a total volume of 125billion CZK in mortgages is expected for this year.

Basic interest rates of central banks

Japan	0,75%
USA	2,00%
Czech Republic	3,50%
EU	4,25%
Slovakia	4,25%
UK	5,00%
Poland	6,00%
Hungary	8,50%

Spending decrease threatens panel houses

A decrease in spending budgeted for the support of high-rise apartment houses (paneláks) might cause the development of new social ghettos. Well-off people will be able to move out from there soon and lower income people will take their place, said Vít Vaníček, the head of the Union of Czech and Moravian Housing Cooperatives (SČMBD). A program for paneláks run by the State Fund for Housing Development (SFRB) will soon have no money left in its budget, according to fund director Jan Wagner. This year, the Czech government approved only Kč 1.5 billion for the program, which is about a third of last year’s amount.

Beroun: residential complex with over 600 flats

The development group Crestyl is readying for construction of a new residential complex called Berounske strane. The project will bring to the market around 621 flats and will have a total size of about 48,000m². The first phase should be finished in 2010. The number of inhabitants in Beroun increased in the last three years by 1,000 people and local municipality expect that in the following five years the total population should increase by another 5,000 people.

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Is the Czech property market like the UK back in 2003

The Czech property market has performed very well over the last couple of years.

There have been reports recently that this growth period is coming to an end.

My view is that yes property price growth is slowing after the heady growth of 2007, but that property price growth in the Czech Republic will still remain healthy over the next couple of years.

It reminds me a lot of the UK property market back in 2003, after a period of good growth every one said that it could not continue much longer and then was the time to get out.

What followed was a sustained period of excellent property price growth for around the next 3-4 years all over the country, making many people very rich in the process. Those who sold sold in 2003 missed out indeed.

The parrallels are similar today in the Czech Republic.

Price growth has been good and has slowed a little (relatively), but I believe there are still good fundamentals to the market.

Unemployment is still low, the economy continues to expand well (unlike in western Europe), prices are still affordable for many and interest rates on mortgages have come down again in the last 2 weeks, 100% LTV (and more) is still available around 5-5.5% interest rate.

Many Czech banks have reported that after the summer period demand for mortgages has increased yet again, and i see this trend continue over the coming years as household debt is still extremely small compared with western European levels.

Overall I still believe strongly in the fundamentals of the Czech property market (similarly in Poland too) and that the next few years will still provide investors with a liquid investment market with good solid growth, good rents and good mortgage finance.

I ponder the question a lot whether I should cash in my gains from the last few years in the Czech Republic, but I fear this would be foolish and I will continue to buy properties in the Czech Republic when I find ones at the right price in the right location.

www.propertyinvestmentinternational.com

czech property news

Some recent Czech property news items:

More banks lower mortgage rates

ČSOB, Hypoteční banka, mBank and Raiffeisenbank in the last week lowered their mortgage interest rates by 0.3-0.4 percentage points, following a similar move last week by Komerční banka and Česká spořitelna. Bawag will reduce its rates today. For 20-year mortgages worth CZK 1.8 million, the cuts will reduce the monthly payment by CZK 300-500 a month.

Demand for mortgages on the rise

The country's leading mortgage provider, Hypoteční banka, reported loan volume of CZK 8 billion in July and August, an 11% increase year-on-year. Raiffeisen said that its own summer mortgage lending was up y/y by about 20%, and UniCredit reported 30% higher mortgage lending. Mortgage brokers and most banks confirm the rising demand for housing loans, as the year started out slowly but could end quite well.

Flat price not to decrease

According to the real estate company RE/MAX a reduction in flat prices is not expected within the next few months. As the economic situation is stabilised and the mortgage rates are lower once again, there is no reason for a slump.

Regulated flat rents in Prague could double

Regulated rents in Prague could increase on average by almost 46% next year. According to the Prague municipals it is expected that the rents in the higher standard flats will rise by 11 – 30 CZK/m² and the rents in the lower standard flats by 16 – 30 CZK/m². The rents for the flats owned by the city will then on average increase to 48 – 95 CZK/m².

CSO reports 25% y-o-y increase of flat prices

Average flat prices rose by 25.4% year-on-year in the second quarter of 2008. Prague prices grew more slowly at 19%, while the increase in some regions topped 31%, the Czech Statistical Office said. Prague inhabitants who want to buy a flat must prepare on average CZK8,500 more for one square meter than one year ago.

HSBC to enter Czech mortgage market

British bank HSBC plans to enter the Czech mortgage market next year, providing housing loans to individuals. This new product should be part of the expansion of HSBC on the local banking market. Currently more than 15 financial institutions operate on the Czech mortgage market.

RPG RE to invest CZK 17bn in reconstruction of flats

RPG Real Estate will spend CZK 17 billion on the reconstruction of more than 44,000 flats located in the northern Moravian towns of Ostrava, Orlová, Havířov, Karviná and Opava. The decision is opposed by a majority of the tenants who prefer to buy the flats and finance the reconstruction on their own.

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