What's in store for rentals?

Gross returns on rental income on Prague apartments has been averaging about 4% for over the last few years.  Smaller apartments typically generated higher yields, up to 5% for 40-sq. m units.  A typical apartment with 120 sq. m has a yield of around 3%.   Both depend on location and amenities. (The average selling price of a typical apartment was 60,000 CZK per sq meter. 

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There is good news – at least for some.  The rental market in Prague and some regional cities is doing fairly well and agents are reporting brisk business.  The Prague expat market has softened significantly however, but there has been a marked increase in local rental activity, albeit at the lower end of the price spectrum.  Czechs once looking at buying are now taking a wait and see position (market conditions and job worries) and renting.  Rental prices in this category has seen some compression as a result strict demands.  

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This "local" market is concentrated on the smaller flats usually along the perimeter of the city center, and almost never in the center itself – those areas typically predominated by foreign renters.  That said, even expats are now having reduced budgets; no more relocation packages and moving out of the center and out to the so called suburbs.  Expect rents to remain relatively stable in Czech Republic with little growth even in Prague.

Investors today, mostly domestic buyers, are looking more to a real return on their investment and less at the potential value upside that ownership might bring.  That is to say, if the rent doesn't support a mortgage, there's no sense in buying. On an all cash transaction, however, if the owner can see a 3% or better return, he can take the risk as it's getting him more than money sitting in the bank. 

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