Is Now a Good Time to Buy a Property in the Czech Republic?

It might seem that buying a property in the Czech Republic using a mortgage is not the best decision these days. The following reasons may convince you otherwise:

• The possibility to negotiate a discount on the purchase price is beginning to arise. The previously common phenomenon has almost completely disappeared in recent years due to the enormous demand for real estate. There were few properties for sale and many potential buyers. A large excess of demand over supply drove prices up and negotiating a price reduction was unrealistic. However, with the change in the market and the weakening of demand, the opportunity for reducing the purchase price is beginning to appear again. A discount on property price has potential to compensate buyers for the higher interest rates and the related interest costs.

• Due to the real estate market's recent development, we can observe a more diverse offer of properties, even in areas where it used to be quite challenging to buy a property with the required parameters during the pandemic. Buyers no longer have to make compromises when choosing their home, or rush to make a decision when buying an investment property. More properties are appearing on the market and the pressure to sign a reservation and purchase contract is decreasing. The buyers can thus allow themselves more time to choose the perfect property, which can be a nice bonus to a potential discounted purchase price.

• Higher interest rates won’t stay the same for the entire duration of the mortgage. Mortgage interest rates are fixed for a certain amount of years (e.g. 5 years), after which the bank will offer you a new interest rate, or you can refinance to another bank. The possibility of negotiating a lower interest rate during the fixation is also not excluded. As soon as the mortgage interest rates drop, it will be possible to enter into negotiations with the lending bank to adjust the interest rate to the level of current market rates. As mentioned above, the discount on the purchase price can be more significant than the interest paid during the higher rate period.

• A mortgage can be a solution even for buyers who made the purchase using their own resources. If, for example, you decided to put cash into a property (due to current high inflation) and the market situation were to reverse, it is possible to apply for a refund of the money from purchase, up to 36 months after the purchase of the property. The bank will provide you with a mortgage, and you can use the money from the loan for any purpose required. A cash-back purchase loan is then repaid like a traditional mortgage. Now you can buy the property in cash and, for example, in two years at (theoretically) lower rates, apply for a cash-back loan and use that money for any other purpose – investment, property purchase etc.

If you are wondering whether it is the right time for you to apply for a mortgage and require advice, do not hesitate to contact us and arrange a free consultation.