News: Czech investors should 'get in now'

Foreign investors interested in buying property in the Czech Republic need to act soon if they are to avoid the large increase in VAT scheduled for the beginning of 2008, reports PropertySecrets.net...

VAT in the Czech Republic will rise from the current level of 5% to 19% on 1 January 2008.  This gives investors currently interested in buying property in the Czech Republic a huge incentive to act soon to avoid the hefty tax increase.

Simon Tweddle, Property Secrets head of research and analysis, commented: "With VAT laws in the Czech Republic changing in January 2008, I believe that 2007 will see investors flocking to buy before the 14 per cent increase.  The 14% increase offers investors a huge incentive to purchase before the year end."

Tweddle continued: "The undoubted demand will fuel price growth, and pockets of the Czech market such as Prague and Brno are expected to grow well over the national average."

Buying property in Czech Republic now easier

Increased investor interest in Czech property has come at a time when buying property in the country has become easier for EU citizens.  Although EU citizenship should have been the sole requirement to buy property in the Czech Republic since it joined the EU in 2004, in practice it has taken until recently for the Czech bureaucracy to implement this law.

Tweddle explains: “A barrier to access for many investors was the requirement to form a company before being able to purchase a property. An EU card should have been the sole requirement since accession into the EU in June 2004 but it has taken time for Czech bureaucracy to catch up with the amended law. Thankfully it now has.”

6-7% GDP growth forecast over next 3 years

Property Secrets are predicting that Czech GDP will grow by 6-7% over the next 3 years on average, with the economy enjoying high levels of foreign direct investment and wage increases.  The rude health of the Czech economy combined with the reduced barriers to foreign ownership and strong incentives to buy ahead of the 2008 VAT increase are likely to prompt strong property price growth.

Property Secrets expect property prices to increase by an average of 13% across the Czech Republic in 2007, with hot-spots such as Prague and Brno expected to record impressive property price growth of 20% and 15% respectively.

But keep your wits about you!

Convinced the Czech Republic sounds like a good bet?  Well, if so, bear in mind developers may be thinking along similar lines.  Tweddle has warned investors that developers interested in cashing in on projects before the end of 2007 may be prepared to cut corners to allow them to get to market in time.

“The potential is for some of the more unscrupulous developers to launch without planning permission and in order to attract buyers, set unrealistic completion dates, " he commented.  “Investors should be aware that any payments made after 01 January 2008 will be liable for the 14% price rise after this date. If payments do flow into 2008, it makes good sense to reconcile this VAT hike with an expected rate of return on the property before investing.”

But as long as you keep your wits about you, the Czech Republic's property market currently offers promising growth potential.

Tweddle commented: “The Czech Republic’s economic performance plus the predicted interest-only mortgages entering the market in late 2007 are extremely good reasons for investors to cast the eye over property there, but the real driver for demand in 2007 is going to be the changing VAT laws that become effective on 1 January 2008.”

“For a UK property investor, Czech offers a low-risk investment with stable long-term growth and the expectation of high capital growth in 2007. With the changing VAT laws, l would expect the canny investor to consider Czech, certainly above the likes of Bulgaria.”

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