Is it interesting to invest into Prague real estate in 2021?
Many people consider buying a real estate in order to earn renting it. COVID restrictions influenced the rental market in Prague significantly. It is especially noticeable in the city center where a lot of ex short term accommodations hit the rental market in March 2020.
How does the investment into the real estate look like in these days? Let’s imagine you want to invest 5 mln CZK (around 190.000 EUR) to buy an apartment and rent it out. For this money you could buy a studio or a one bedroom apartment of around 45 m2 in any part of Prague further from the city center. In Prague 1 or 2 for this price you could more likely buy a studio apartment of up to 35 m2.
If you want to use mortgage under the standard conditions, you’d give 20% of your own money (1 mln. CZK) and 80% would be financed by the bank. Let’s assume your mortgage length is 30 years and you got it under the 2,29% interest rate which is the current official rate of many banks. Your monthly payment would be 15.372 CZK.
The lease price depends on the location, type of the building, state of the apartment, whether it’s furnished or unfurnished and how many other similar offers are in your area. For example, at this moment there are over 3000 rental offers of the apartments between 27 and 50 m2 in whole Prague. It is a huge number comparing to the amount 2 years ago which was three times less.
The lease prices start from 7500 CZK for the small apartments of 30 m2 in the city center and reach 16.000 CZK for the larger apartments of 45 m2 after reconstruction.
So depends on different conditions that I mentioned earlier the chances are that your monthly mortgage payment may not be covered with the lease nowadays.
If you decide to invest your own money without any mortgage, then you may want to know how fast you’ll return your invested money and start earning. Again, depends on the lease price this number may very between 26 and 55 years.
Pretty sad, right?
Well, it simply shows that the investment into real estate with the idea of earning by renting it may not be appealing in the current situation in Prague: purchase prices are high, rental prices are low.
Nevertheless, this was not always the case. Real estate market is dynamic. After the prices drop between 2008 and 2012 they have doubled by 2021.
This fact together with small real estate taxes makes Czech real estate an interesting investment opportunity on the long run.
If you think of buying a real estate in Prague or nearby, reach out to me and I’ll help you to find a good investment opportunity.
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