Will the second half of this year bring more affordable housing?

The key development giving prospective property buyers hope was the abolition of real estate acquisition tax. Following lengthy debates, the government approved this at the end of April. However, Finance Minister Alena Schillerová also stated that the amendment would apply retrospectively, including to those who bought a property or plot of land as early as December 2019 onwards. “The proposal must still be approved by Parliament through the standard legislative process, but we expect this to be a mere formality. In that case, people can look forward to considerable savings. Real estate acquisition tax amounts to 4% of the sale price, which for properties in Prague and the Central Bohemian Region can represent several hundred thousand Czech crowns,” explains David Novotný, owner and managing director of the independent real estate company Bohemian Estates.

The company has operated on the market since 2006, when it was founded with the aim of providing genuinely comprehensive solutions in property management and residential and commercial property investment to both small and large investors. The company now has physical branches in Prague, Brno and Ostrava, and manages more than 2,000 flats in the Czech Republic and abroad, with a total value of CZK 15 billion. “In addition to property investment, we also manage long-term and short-term rentals and, of course, focus on sourcing and vetting properties for prospective buyers. It is therefore no surprise that we have experienced an unprecedented lull in the real estate market since March,” says Novotný.

Novotný adds that the next year and a half will be crucial for the real estate market. Alongside the abolition of real estate acquisition tax, the tax relief used by people with home loans will also be abolished. However, this will only apply to properties purchased after 2021. “In practice, this means that property buyers have an effective window from December 2019 to December 2021 during which they will not pay acquisition tax, while still being able to deduct interest on their home loan from their tax base,” explains David Novotný.

New mortgage loans should also reflect the reduction in the base interest rate to 0.25%, announced last Thursday by the Czech National Bank Board in response to current developments in the Czech economy. “Consumer loan and home loan interest rates are based on the base rate, so mortgages can be expected to become cheaper. We may even see historic lows surpassed. Although the conditions for obtaining a mortgage remain in place, people now have an opportunity to make significant savings,” adds Novotný.

So, will the real estate market revive? “Personally, I believe that now more than ever, it has become clear that people need some form of security and a financial reserve. We never know what may happen, and those most affected by the coronavirus pandemic are probably aware of that too. Property investment has been, is and will remain one of the safest ways to grow wealth,” concludes David Novotný on behalf of Bohemian Estates International.