Buy, sell, or rent in Prague? Honest answers from a long-time Czech realtor to expats

For both property owners and renters in Prague and the Czech Republic, the Covid era can be a confusing time. With so many factors affecting the economy, how will real estate prices look in the long term and is now the time to upgrade, downgrade, or change your living space?

Jana Reich has been selling real estate and offering property management and homestaging services in the Czech capital for six years, specializing mainly in Prague 4, 5, 10, and the southern part of Prague-East and West. Many of her clients are foreigners who live abroad or here in the Czech Republic and look to her for guidance on how to navigate the local real estate market.

Reich says before making any big decisions, Covid or not, she'd advise anyone who's thinking of buying or selling to first and foremost consider their housing needs.

"I think what's most important is to understand a client’s lifestyle and needs, not only for the next few months but for the coming years, as a reckless move can cause unnecessary complications," says Reich. Here she breaks down the eternal question of rather to buy, rent, or sell and explains why sometimes its best to simply wait.

Reich say the current market situation favors sellers. Prices will likely continue to rise for building lots and houses. Building materials and hourly rates for builders and craftsmen, of which there is a shortage, are also on the rise.

She says the demand for certain kinds of properties is rapidly increasing along with acquisition prices due to the coronavirus crisis.

Selling makes sense under such conditions, Reich says, especially for those who don't just want to sell their flat or home but immediately buy something else.

“For buyers who still have large amounts of their own funds in their bank accounts and want to protect this money from expected inflation real estate is a good investment,” she says.

Why it's not always a good idea to sell

"Right now in the Czech Republic demand is currently outweighing the supply of property," says Reich who recommends keeping a property if you don't absolutely need to sell it, as no major decline in the market is predicted as of yet.

Reich says she often encounters clients who think they want to sell, but don't actually realize all the complications that go along with selling a property in the Czech Republic.

“If the property is encumbered by a mortgage, we must know whether the loan can be repaid early and under what conditions," she says.

There's also tax liability to consider. Reich points out that, with some exceptions, in the Czech Republic people must own a property for at least five years and live in it for at least two years, otherwise they must pay tax to the state on the sale of real estate. She says that for properties purchased in 2021, people must now own the property for at least ten years or live in them for two before selling without paying tax.

Aside from legalities, Reich says that new trends designed to enhance the appeal of a listed property to achieve higher sales prices can also add up for the seller. She advises clients to take into account the need for attracting potential buyers with homestaging and new technologies, such as drone videos, graphic visualizations, 3D tours, and, particularly during Covid, video tours.

Renters in Prague and the Czech Republic: when, what, and where to buy

Those who are considering purchasing a property but have only rented so far should consider a development project. “Purchase prices for these apartments developments are relatively favorable and until it's built you can live in a rental, which is now advantageous. Interest rates are also acceptable and with a fixed rate for five to seven years, you can't go wrong,” Reich says.

Czech banking institutions still provide loans with relatively good interest rates, however, people looking for rates below 2 percent should know that mortgage rates have started to rise to 2.5 percent – which means anyone considering taking out a mortgage, should do so as soon as possible. Covid has also affected approval conditions.

“Some so-called risk groups – especially people working in the hospitality industry, who suffered the most from the lockdown – already have a slim chance of approval of a loan from a bank. And we know that the situation will be even tighter for some groups,” Reich says.

With regard to the impending rise in interest rates above 3 percent she recommends that renters get a loan now and consider asking for a longer fixation period.

If a client's financial situation allows, Reich recommends buying a 2 + kk or 2 + 1 starter apartment. “This apartment is ideal for a couple and if you take it that way, a family with two children will still fit here. At least for a transitional period. If you decide to sell it, its price will be easier for buyers to manage compared to 3 + kk and more,” she advises.

As a realtor who has accompanied clients through the entire process of buying, selling or renting a flat or home for years, Reich whose team includes lawyers to painters to plumbers, says one of the biggest mistakes people make is fixating on a certain neighborhood.

In terms of where to buy in Prague, she says that many of her clients seek bargain apartments or houses in the vicinity of Prague 4 or 6. But often times she's able to help someone find something that's a better fit for their personality not necessarily their neighborhood preference.

"For people who want everything at their fingertips but quiet at the weekend I can recommend some very peaceful parts of Smíchov," she says. "And for those who like to read a book on the way to work, let's get you something affordable on the outskirts of Prague that gets you into town in 30 minutes while reading your favorite novel."