Until now interest in the Czech Republic mainly centred on the capital, Prague. But as prices have risen the move outward is now in full flow.
'Initial interest from foreign investors significantly increased with the Czech Republic's accession into the European Union in 2004,' said Greg Gibb, investment director at CERES Group, the country's first residential agency catering to nonresident investors.
'The main interest was in Prague as they saw it as a stable platform to the rest of Central and Eastern Europe. Prague still remains popular but regional cities are finally getting significant attention from developers and investors, too, including Brno, Plzeň, Ostrava and Most,' he added.
Gibb describes the majority of international investors as falling into two distinct categories – those whose experience with the Prague real estate market have left them "secure" about making property investments elsewhere in the country, and those who are chasing capital cities further east, in Poland, Bulgaria and Romania.
The former group, Gibb says, are often pleasantly surprised with what they find in the regional areas. "Prague continues to remain strong. However, investors seeking higher growth and yields are looking at alternative opportunities. Regional locations are becoming more popular with international investors, as they offer not only potential strong capital growth but also good yields."
Stuart Bloomfield, associate director at CB Richard Ellis, agrees. The regional cities have started to attract mostly private investors from abroad, who find themselves able to get the best value for their money outside of the Czech capital.
'Of course, Prague is No. 1 in the consciousness of most foreign investors. However, if you went to Brno, you'd find that you'd be able to get a lot more for your money,' he said.
The Czech Republic is still regarded as an emerging market compared with that of most West European countries but with rapidly increasing quality. The luxury property market in Prague is likely to experience the greatest amount of growth as the supply is far outstripped by current demand, with wealthier investors moving in.
'The principal benefits of Czech real estate are strong growth in an emerging market, within a country with a very strong economy,' Gibb explained.
But perhaps the biggest surprise in the Czech real estate market has been the overall failure of the rental market to sustain the same levels of growth as the property market.
'While capital values have grown significantly during the last few years, the rental market has not kept in tune,' Gibb said. 'This has ultimately pushed down the yields to the levels that we currently experience. We believe that the rental market will finally 'wake up' in the next 12 to 18 months.'
