Summary
Korunni Residence is situated in, Vinohrady, the Knightsbridge of Prague.
This is a high quality area, popular with both wealthy locals and expats, not far from the city centre.
• 3% discount off list price
• prices approx 10% below market value
• Prague market growing at 20-25% per annum
• Very high standard development in a very high quality area
• Excellent transport links (next to tram and metro)
• 15/85 payment terms (compared to 20/20/60 as standard)
• 3 year build time (completion end 2010)
• Best mortgage finance in Central & Eastern Europe
Prime areas of Prague are currently undervalued compared to the rest of the market and it is in these areas that are both low risk and have the greatest potential for growth.
The development will be of a high standard appropriate for the area. Surrounded on two sides by luxury villas and on the other two sides by quality old build apartment buildings.
There is a metro station just 4 minutes walk away (or one tram stop) which is just 3 stops from the centre, furthermore there is a tram stop directly outside the development with direct access to the centre of the city.
This is currently the best value development in the whole of Prague.
Download:
Investment Report
and
Price Spreadsheet.
Market Analysis
The Prague property market is increasing on average at 20-25% per annum currently and the continued strong fundamentals of the economy mean that good growth is expected to continue for the foreseeable future.
It is our opinion that high end properties are currently undervalued compared to the rest of the market (esp when compared to other mature property markets). This end of the market has not grown as much as the lower end recently and is now well positioned (undervalued) for substantial growth. Hence we see this as a safe low risk bet for strong future growth.
The Czech Republic has one of the high growth rates of millionaires in the world currently and a number of Swiss and Austrian private banks have set up branches in Prague to cater for their needs.
Furthermore, expected changes to the income tax rate (down to 15% flat rate) will see the more wealthy in the society have an even high disposable income than currently, inevitably some of this money will find its way into the property market.
Some quick facts/reasons why investing in Prague really adds up:
- continued economic success is pumping huge amounts of money into people’s pockets
- low risk blue chip location
- very low property buying costs
- great mortgage finance
o lowest base rates in Europe (along with Switzerland)
o 90-100% LTV available
- best and most established rental market in CEE
- healthy capital growth rates of 20-25% per annum
Prices
| Prices | 4,600,000 – 23,100,000 CZK |
| Discount off list price | 3% |
| Payment terms |
100,000 CZK reservation fee
15% deposit (minus reservation fee)
85% completion
Investors buying 5 or more units get 10/90 terms
NB developers standard terms are 20/20/60
|
| Finders Fee | £1000 + 2% |
| Legal Fees | 30,940 CZK (inc VAT) per unit |
Please down the
price spreadsheet for full price details.
Price Comparisons:
Prices range from 80-100,000 CZK/sqm, whereas typical prices in the area are at least 100-110 CZK/sqm. Hence the development is priced around 10% below the market value.
The developer is famous for pricing their developments very competitively.
On top of this we have negotiated a 3% discount off the list price.
Furthermore, the developer’s standard terms (that everyone else pays) is 20% deposit, 20% after 1.5 years and 60% on completion. Our terms on this deal will be 15% deposit and 85% on completion.
Note: the completion is not due until the end of 2010 (3 years away) making this a classic off-plan investment opportunity.
Rents:
Typical rents for this quality development and area are around 450 CZK/sqm/mth.
Development
The development is a shaped like a quadrangle and is split into 8 sections (A to H).
Blocks A-C will have 8 floors, blocks D-F will have 6 floors and blocks G-H will have 7 floors.
In total 267 apartments will be built.
All units will have substantial external space, which is fitting for such a good quality development.
There will be green spaces in the centre of the development as well as water feature.
This will be a gated development and have 24 hour security.
Purchase of parking is not compulsory on this development, however, it is recommended both from a rental and resale perspective.
Kitchens are not included and can be arranged nearer the time of completion, current estimates indicate that one should budget 5,000 – 10,000 euros for a kitchen.
The developer is a large well renowned company that builds excellent quality developments and is famous for pricing their units well.
Mortgages
The Czech Republic has the best (and easiest to obtain) finance available in the whole of Central and Eastern Europe, as well as the lowest base rates in Europe (alongside Switzerland).
| Term | Rate |
| LTV | 100% max
80-90% typical |
| Interest Rate | 4.5 – 5.5% |
| Term | Up to 30 years |
Refinance and non-status mortgages are also available (subject to status) in the Czech Republic.
It is expected by the time Korunni Residence completes in 2010 that the finance market for foreigners in the Czech Republic will have advanced even further.
Rentals
It is impossible to predict how the rental market will be in 3 years time. However, given the prime location of this development it expected to rent well. Furthermore, deregulation of regulated tenancies are currently pushing up rents substantially in the area.
Looking at comparable rental prices in the area we predict that a typical unit will rent at 450 CZK/sqm/mth.
This gives typical yields of around 5-6% (unit dependent).
Property Investment International has a full rental program in place to take care of the Letting & Management aspects of your property. In addition we also have our own Czech real estate agency which facilitates all of our lettings and resales.
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