Astra have a close relationship with Investment Solutions Group (ISG) (http://isgfinance.cz), who are able to offer you assistance with investment property, primarily in the Czech Republic. Astra are well aware that successful investing involves diversification and as the world gets smaller clients are looking to invest in different property markets.
Investment Property in the Czech Republic
ISG has been providing advice for international buyers in Prague for many years. They speak the language and have very strong relationships with local banks and developers. This enables them to provide customers with a ‘one stop shop’ when buying property in Prague.
ISG specialise in providing advice on property investments with current minimum rental yields of 6%. They are able to secure great value mortgage products for both EU and non-EU resident clients. This makes buying in Prague an excellent and affordable opportunity for the knowledgeable investor.
ISG work in two distinct property markets in order to source high yielding investments: small new-build properties to the city edges and multi-bedroom traditional city centre property.
Case 1: Small New-Build Property
New-build property is currently very well priced, especially off-plan. Developers find it hard to sell off-plan property before it is built, due to the local culture. This culture extends even to large developers with excellent track records. Discounts when buying off-plan can be very generous to entice early buyers. Small apartments offer the best rental yields when it comes to new-build options. The smallest apartments attract people looking to move from outdated apartments into something new, or young people looking for their first flat on their own. The demand for smaller flats has strongly pushed up rental prices. Purchase prices have however remained unchanged, with developers normally having a fairly set price per square meter.
ISG recommend properties that are under GBP 50,000. In general rents for these apartments are around GBP 250/month, meaning a rental yield of 6%. Rents do not fluctuate too much for the size of the flat, but purchase prices can often be lower.
Here is an example:
- Property: Studio Flat, 5km from Centre
- Size: 35m2
- Price: CZK 1,700,000
- Deposit: CZK 170,000
- Mortgage: CZK 1,530,000
- Monthly Repayments*: CZK 6,500 (*30 year term, 3% interest rate fixed for 5 years)
- Monthly Rent: CZK 8,500
- Gross Monthly Profit: CZK 2,000 (equivalent to GBP 54 or EUR 72).
This is a repayment mortgage, so capital is also being repaid. Over 5 years some CZK 170,000 will have also been repaid. Further to this, after 5 years the investment is free of local capital gains tax.
Case 2: Traditional City Centre Property
New-build property is generally priced at a standard price per square meter. The second hand market is not so uniform. Larger flats in the centre generally are found to be a much lower price per square meter. Conversely rents on multiple-bedroom flats can be seen to be more uniform, with expatriates and students keen to live in groups. Three and more bedroom flats can also achieve similar rental yields of 6%+.
There is a further advantage in property location. These central properties tend to hold their values better and often appreciate more in value than those on the outskirts of a city. Given the economic situation, locals are less likely to spend big money on central property, when they can buy cheaply away from the centre. This means we are seeing large, central properties sold below market value.
Here is an example:
- Property: 4-Bed Flat, City Centre
- Size: 130m2
- Price: CZK 6,400,000
- Deposit: CZK 640,000
- Mortgage: CZK 5,760,000
- Monthly Repayments*: CZK 24,300 (30 year term, 3% interest rate fixed for 5 years)
- Monthly Rent: CZK 32,000
- Gross Monthly Profit: CZK 7,700 (equivalent to GBP 205 or EUR 280).
This is a repayment mortgage, so capital is also being repaid. Over 5 years some CZK 640,000 will have also been repaid. Further to this, after 5 years the investment is free of local capital gains tax.