Real Estate Practices in the Czech Republic
Real Estate Practices in the Czech Republic
There are three reasons to buy a property in Prague, the city which, in any rankings, you always find among the five most beautiful cities in Europe.
“You get a real quality life for little money”
1. Prague is a modern city with rich culture life - You will never be bored.
2. High value for the money - You can hardly buy such beautiful apartments in historic buildings for a better price, just see the big difference compared to Paris).
3. Quality medical care – The Czech Republic is becoming a popular target for medical tourism.
Real Estate Licensing Requirements in Czech Republic
Real estate sector is not regulated by a special Law. Anybody can become broker or agent provided he or she is registered as a commercial entity. Nearly half of the market transactions are carried out without the real estate agencies´ assistance.
Available Housing Types in Czech Republic
- New developments v. Old classic buildings.
- Apartments and houses/villas (very often with a garden: generally of 500m2 – 1500m2 size)
- By location: City center, Prague´s districts and Prague´s surroundings
- Apartments in Prague’s prime residential districts now cost around US$3,000-5,000 per sq. m.
Real Estate Commission in Czech Republic
The agent’s commission is around 3% to 5% without 21%VAT
Mortgages or Financing Options Available to Foreign Investors
If you are a non-EU national then you will need to have permanent residency in the Czech Republic. If you are an EU national it is easier, you will just need a residency permit - temporary or permanent. For married expat couples, only one of you needs to meet these requirements.
Normally you should be able to get an 80-100% mortgage over a period of up to 30 or 40 years, depending on your situation. This means that the bank will lend you 80-100% of the total cost of the real estate you are purchasing. Mortgages in the Czech Republic are generally blended repayment mortgages. This means that the monthly mortgage payments are fixed, and they partly cover interest and partly principal repayment. The interest rate is fixed for a number of years at a time.
The two easiest options are to either go to the bank yourself and apply for a mortgage or go to a mortgage broker and let them do the work for you. If you decide you want to do it yourself then most of the main banks in Prague now have comprehensive English websites, and you should be able to find English-speaking employees in the main branches to help advice you.
Property Taxes in Czech Republic
Tax from immovable properties (until 2013 real estate tax) generally applies to land and buildings. Each of these tax rates is set out individually. Subject of the tax are immovable properties (land, buildings, units) situated in the territory of the Czech Republic registered in the Land Registry. The tax period is a calendar year and a taxpayer is required to file a tax return for the tax period to the corresponding tax authority by 31 January. The property taxes are negligible (small apartment in Prague US$ 40 per year).
Buyer Acquisition Costs in the Czech Republic
Legal Fees 1% (+ 21% VAT)
Registration Fees 0.01% - 0.02%
Legal fees are generally negotiable. Registration fees include verification of two signatures by notary, and stamps in the cadastral office (US$ 50).
Seller Disposition Costs in the Czech Republic
Real Estate Acquisition Tax 4%
Agent´s Fee 3% - 5%
Real estate acquisition tax is levied at a rate of 4% and the tax base is either the sales price or the market value of the property, whichever is higher. The seller is generally liable to pay for real estate acquisition tax, but the buyer and seller can negotiate that the buyer will pay for this tax. Real estate acquisition tax replaced the former real estate transfer tax as of 01 January 2014.
Property Closing Procedures in the Czech Republic
Once the property passes scrutiny, the attorney and the real estate agent will draw up a) the reservation contract (intent to purchase) and b) the contract of deposit, which is the result of the parties negotiating and agreeing a price and down payment. The usual down payment is 10% of the price.
As soon as a purchase contract has been signed by both parties, the buyer normally has to hand over the remaining amount of the purchase price, which will be kept in ‘escrow’. The buyer will then apply to the property registrar to begin the transfer of title. It takes an average of 60 days to complete all the procedures needed to register a property in Czech Republic.