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How to choose the right property and what to be aware of?

Issued 17.04.2019

Prices of properties in Czech Republic are still increasing, mostly in large cities where its supply is still very low. CN has left interest rates unchanged, and is in the process of changng the rules to make mortgages accessible to young borrowers. Applying for a mortgage loan has stricter conditions now so it´s necessary to really think through every aspects of buying a new property.

Write down all criteria

When buying a property consider all the requirements your new property should fulfill. Divide these requirements into two categories, hard and soft criteria. In the first category, write down all the things your new property need to have. This group will include requirements such as numbers of rooms or the maximum price you can pay. To the other group write down all the things you want your property to have but which you can live without and are not strictly necessary. After that division you should search for your new property mainly by the Hard criteria. Some of real estate portal apps allow you to enter your hard criteria and set a "watch" function which will automatically send you an email with offers that match your criteria.

Location and Local ammenities

One key criteria which must be considered is Location. The property should be close to public transit or have good roads, rail if travelling for work to near by cities. Additionally the local should also offer other public services, such as doctors, post office, shopping, restaurants, schools, and recreation facilities nearby. Also check if the property is in an area that is economically growing which will help to increase its value over the long term. This type of information such as population growth or local investment can be obtained from the local town hall.

Information from the Land Registry Office

If you have found your desired property, it is necessary to act fast. Contact the broker right away to schedule a viewing at the earliest possible opportunity. Before going to the appointment, search for some basic information about the property from the Land Registry Office. Verify the name of the owner and any liens that may be on the property such as bank mortgages etc.. Check if the land survey of the property matches the physical reality once you do your site visit. Moreover, check if the property has access to all engineering infrastructure and if the access to it is clear or it has a right of way across adjacent property. Confirming this type of information will make sure that you don´t have any unwanted surprises if you purchase the property.  If you like this property, check if it meets all your hard criteria and only if it does should you sign the reservation contract. In case it doesn´t it is better to wait for more matching opportunity or to really think this purchase through. 

Property evaluation

After confirming the information from the Land Registery Office, it is wise to hire a construction engineer or a technician and to review the property. Let them do an evaluation and also let them provide you with an estimation of reconstructuion costs (if needed). Doing this may provide you with leverage to decrease the purchase price. . 

If you are satisfied the last thing you have to do is to sign the reservation contract. Check its conditions, mainly if the reservation period is long enough for you to get your mortgage loan and to secure all your savings. 

The Czech National Bank (CNB) hasn´t increased the prime rate, mortgages for younger people should be more affordable

In the last CNB meeting on 28th of March it was decided not to increase the prime rate. In the first quater of 2019 the volume of housing mortgages has decreased by 32% . The main reason of this huge decrease is the current availability to get a mortgage since the new CNB DTI and DSTI restrictions. Due to this decision the interest rates of banks are still decreasing.

Currently there is an amendment to the Act by the Czech National Bank which could help younger people, those under 36 years of the age to get a mortgage. Specifically applicants under 36 years of age will be able to apply for a mortgage to 100% of the property value and could also have lower income. If the parlliament passes these proposals then younger borrowers could get a 100% LTV mortgage, DSTI to 50% and DTI up to 10x their net annual income. These changes, if passes,will apply only to young people applying for a mortgage for owner occupied housing.

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