When the Iron Curtain came down in the late 1980s and eastern European countries came out from under the yoke of Russian communism political rearrangement was not the only consequence. It can also be said that European geography was altered. The centre of western Europe as it used to be was probably regarded as being somewhere like Zurich in Switzerland, but now if we look at a map of Europe as a whole, stretching from Ireland in the west to Ukraine in the east, and from Gibraltar in the south to Oslo and Scandinavia in the north, then the centre is pretty much at Prague in the Czech Republic.
As well as political and geographical alterations, the other inevitable change has been in the financial arena. As countries from the east of Europe stabilise they have been seeking to join the European Union and have begun to embrace western-style capitalism. This has given people from the old eastern bloc the opportunity to run their own financial affairs and aspire towards financial freedom. Alongside this, governments have been more than happy to welcome foreign investment into their boundaries.
As these countries strive to ï¿½catch upï¿½ with western Europe, financially and politically, the time is right for overseas properties to come into consideration as a possible investment strategy for UK investors. Such an investor into these locations should look for buy-to-let opportunities without emotion (e.g. donï¿½t buy shares in the football club you support) as these are not holiday homes for use by the investor, but buy-to-let investments. If you are not one already, prepare to become a landlord/lady.
Consider a tick-box approach. Good questions to ask are:
- Is the property in an area with price rises possible in the future?
- Has the country embraced western-style markets?
- Is the area ripe for an influx of commercial investment?
- Is there a good supply of tenants?
- Are the properties affordable?
- Is there a mix of foreign and home investment?
- Is there a mix of rental properties and locally-owned properties?
- Are payment terms favourable?
In each case for Prague the boxes are ticked in its favour.
- Yes, price rises are highly likely as most developments are staged developments, with price rises built in; the Czech economy is growing; the Czech currency is rising; VAT is due to increase (from 5% to 19%) on 1st January 2008, and developers will have to build in prices increase to meet that.
- Yes, the Czech Republic has joined the EU, aims to join the Euro, and is western in style and feel.
- Yes, with Prague now being in the centre of Europe, and with companies such as DHL and Lego already moving in, it is easy to see further companies moving in to the area, and thereby increasing the need for workers to come, and they will all need places to live.
- Yes, see 3 above. Also, the old communist block housing is crumbling, and gradually being demolished, meaning that there will be a significant re-housing demand.
- Properties within 20 miles of Prague are available at less than ï¿½25,000, and in the centre of Prague at around ï¿½50,000. With just a 15% and other fees the initial investment need only be around ï¿½8,000.
- Yes. In most cases the developers are selling only a small percentage (say 20%) to foreign investors.
- If we assume that foreign-bought properties are for rental, and the rest are bought by Czechs, most for their own use, then there is a good balance in favour of owners. This will tend to mean that the area will be well maintained.
- Yes. Many overseas property investments are bought by a series of staged payments, with the final payment being due on completion. This is difficult to fund with a mortgage. In this case, a 15% deposit is required at exchange, and the rest is not due until completion. This is easy to fund with a mortgage.
Prague ticks all the boxes!
Well, it would, wouldnï¿½t it? But there is no doubt that Prague is a good, sound investment, with little risk, and with good chance of excellent gains over the next five years.
The time is right for investment ï¿½ now!
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