Time for UK property investors to check out the Czech Republic

The Czech Republic’s property market is primed for a second phase of accelerated growth which is catching the eye of investors across Europe, but it isn’t solely the strength of the economy that is driving this interest. Changing VAT laws will see UK investors flock to buy in Czech before new rates come into practice in 2008, according to Property Secrets Head of Research and Analysis Simon Tweddle.

There are several reasons why Czech is set to outperform its rivals. Property Secrets forecast an average 6-7% GDP growth for the next 3 years in Czech with FDI and wage increases features of the strong economic performance which is boosting its property market. Property Secrets expect property prices to increase by an average of 13% across Czech in 2007, with hot-spots such as Prague and Brno forecasted to record impressive property price growth of 20% and 15% respectively.

That accounts for the growth and to an extent the demand, but this doesn’t tell the whole story as Tweddle outlines.

“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.”

The new legislation will see VAT rates increasing on 1 January 2008 from the current 5% to 19%.

Tweddle continues; “The 14% increase offers investors a huge incentive to purchase before the year end. 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.

“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.”

Another legislative change that has finally been accepted in the Czech Republic is the procedure for EU citizens buying a property in Czech. Tweddle elaborates:

“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.”

But Tweddle warns investors to be aware that developers are equally interested in cashing in on projects before year end 2007 which may lead to them cutting corners to get to market.

“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.

“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.”

For more information and research in investing in the Czech Republic and other property hot-spots, visit propertysecrets.net.