Mortgages for foreigners

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Are you an expat living in Prague and would like to own flat or house? But don´t know much about loans?
Do you feel communication with banks is too complicated?
The same conditions as for Czech citizens.
Do you need help with searching for property, communication with seller and developer?
contact us +420 605 502 103

The CNB strikes against mortgages again

The way to the mortgage is even more winding. The Czech National Bank (CNB) has come under the guise of consumer protection for further tightening of mortgages. Starting in October, two new mortgage restrictions will be introduced. Freed and young will have to make a living with their parents or rent, but it will also make them bigger.
Concerns about mortgage buyers were filled with the latest financial stability report after the CNB's Tuesday press conference. As of October 1, the CNB, in its recommendations, introduces requirements for the borrower's borrowing rate.

Debt indicators in the CNB's viewfinder
The DML will not be more than nine times its annual net income (the DTI indicator) and the monthly debt repayment will be less than 45 percent of its net monthly income (DSTI indicator).
In specific cases, the set DTI and DSTI values will be exceeded, but only five percent of the loans. Jan Frait, director of the Financial Stability Department, said the new measures are focused on new loans only and will not affect loans refinanced.
One year ago, the CNB warned that it considered a high-risk debt repayment higher than 40 percent of the net monthly income and the total amount of debt exceeding eight times the net annual income. The new limits are somewhat milder because, according to the CNB, they should not be a shock or a surprise. Implementation banks give three to four months on the basis of a commitment approved by the Budget Committee in connection with the draft law on the CNB.
The CNB warns that the biggest risks to financial stability are born in good times when both banks and their clients perceive risks as low. And at that time we are now. The Central Bank, therefore, in an effort to protect the household from the debt trap and hence the health of banks, decided to tighten mortgages.

The CNB's real estate prices are not cooling, yet it is ready to strengthen it
And real estate prices are another wrinkle at the head of the central bank. Real estate prices grew in the Czech Republic most of the year, most of the EU, by an average of 16 percent. There is also an overvaluation of the prices of apartments, which, according to the CNB estimates, reaches 15 percent.
The conditions for spiraling the spiral between real estate prices and loans for their purchase continue to remain, according to the CNB. The current limits of the LTV due to the overvaluation of real estate prices by the CNB are the limit value and the central bank is therefore prepared to tighten it if necessary.

Singles and young families in the narrow
The CNB may intervene up to one third of the applicants. "The tightening of the CNB's recommendation for mortgage lending can affect a quarter to a third of new mortgage applicants
, especially among young people who need to finance their first housing. We assume that as a result of continued tightening of conditions and rising interest rates on the part of the central bank, the popularity of mortgages with long interest rate fixations will continue to grow.
The introduction of stricter mortgage rules will make homelessness more accessible to free people and young families, not only their own, but also their tenants. Singles and young families will be left to live longer, if not for life, in a tenancy. Rental prices, until the economy and consumers get better, will grow in big cities and their surroundings much faster.

Are you an expat living in Prague and would like to own flat or house? But don´t know much about loans?
Do you feel communication with banks is too complicated?
The same conditions as for Czech citizens.
Do you need help with searching for property, communication with seller and developer?

contact us +420 605 502 103

It's now easier to contact Mortgages for foreigners.

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Do you want to buy own place?
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+420 605 502 103

CNB: Real estate prices have been overestimated by about 10%

The Czech National Bank (CNB) takes care of the stability of the financial sector. And it may be at risk from real estate bubble. Is it threatening? According to the CNB, the prices of residential property were overvalued by about 10% ...

Real estate prices in the Czech Republic have recently grown the fastest in the European Union. There are several reasons for rapid growth: cheap and still available mortgage loans that households are interested in due to low unemployment and persistent income security in the foreseeable future ... and a limited supply of new flats, especially in Prague and Brno, where bureaucratic apparatus in the building permit.
The rapid rise in property prices does not mean "bubble inflation". However, according to the models of the Czech National Bank, "in the middle of 2017 housing prices were overvalued by about 10%". What can cause overestimation?
Stability of the bank is not jeopardized
In January 2018, the report "Risks for Financial Stability and Indicators", which is complemented by a regular annual Financial Stability Report, banks are sufficiently resilient.
"The results of the macro-rating tests confirmed that the banking sector, representing 80% of the domestic financial sector's assets, is stable overall," the CNB said. But she is very cautious in her assessment. The situation of banks has ceased to improve.
"Some sources of structural risks such as the concentration of bank exposures on the real estate market, increasing investment by financial institutions in foreign assets, and an increase in the share of foreign currency assets in financial institutions' balances remain," warns the CNB.
The Bank's focus on mortgage lending in a situation where the CNB expects to overstate real estate prices by about 10% may be risky for banks as the Czech economy breaks into the opposite phase of the economic cycle - into a recession.
Real estate grows fastest in the EU, but ...
Prices of residential real estate in the Czech Republic have been breaking records for the last year at European level and are growing fastest among all Member States. This would at first glance suggest their overheating and signs of real estate bubbles.
But the second look is no longer so unambiguous. Over the past 5 years, the average Czech property has been staying in the central part of Europe's peloton.
The banks would not be affected by the decline in property prices
Any fall in real estate prices, in theory (and history turned out to be the practice), could negatively affect the stability of banks. Residential real estate serves as a pledge against mortgage loans, which make up a large part of the commercial bank business. If real estate prices drop and mortgage repayment will deteriorate, banks may get into trouble. But this is far from in the Czech Republic.
First and foremost, the share of non-performing loans is still decreasing. "Credit risk, measured by the 12-month default rate indicator, declined slightly during the second quarter of 2017 for home loans and consumer loans," the CNB notes, adding, however, that the decline in credit risk may also include rapid growth in new loans. People with new loans usually take some time to get into financial difficulties and stop paying off properly.
However, the dynamics of providing new loans is slowing. This is partly due to the Czech National Bank, which recommends commercial banks not to provide mortgages with LTV (mortgage to mortgage value) over 90%, and only 15% of new loans should have LTVs higher than 80%. Banks have only listened to the "recommendations" at first, but their discipline has increased in the last few quarters.
Apartment prices are overstated ... wait with the purchase?
According to the CNB, the prices of residential real estate are overvalued by about 10%. This may be a signal that house and family house prices may decline. They may or may not.
Even if real estate prices are overestimated, they may not decrease. In the first place, the "bubble" can inflate to much larger dimensions. However, even if there is no further growth, there may not be a fall in prices. Bubble in the real estate market can be "blown up" by lower price increases in the coming years.
Whether or not price falls (or further growth) does not know. It can only be estimated more or less sophisticated. However, if the developer market could move and turn the economic cycle, it could also decline. Against the displacement of construction, construction laws and rigid building authorities are underway, and the recession is estimated to be on the agenda for a couple of years

Current mortgage rates: Retraction continues and another is on the horizon
The rise in mortgage interest rates continues. Also, banks that were still running immediately after February's growth in the CNB's rates were also on the rise. The next wave of crunching is coming closer. Banks are therefore looking for new clients.
Only almost all banks have responded to the increase in the CNB's key interest rates. Some banks have projected higher mortgage rates from the beginning of the year even twice. Most often, mortgages rise by 0.2 percentage points. There are also exceptions.
One price is not enough
Even at the beginning of February, it appeared that Česká spořitelna will not start to grow up after January's increase in mortgage rates. "Česká spořitelna has responded to the market development and conditions of the CNB earlier. At this moment, CS interest rates on mortgages do not increase, "said Česká spořitelna spokesperson Filip Hrubý after raising the basic rates of the CNB.
But the wait for Česká spořitelna did not last long. On February 19, it raised its mortgage interest rates by 0.2 percentage point for all fixations this year. Three-year fixation is thus only a small step away from the three percent threshold (2.99 percent) and one-yearly from 4 percent (3.99 percent). Five-year fixations have risen from 2.49 to 2.69 percent.
This year, Equa Bank also joined the second increase in mortgage rates. Last week, interest rates on mortgages for three years also increased by 0.2 percentage points to 2.49 percent and five-year times even by 0.3 percentage points to 2.59 percent.
The Fio Bank and Wüstenrot are also rising for the second time this year. In mid-February, Fio Bank increased mortgage rates on three-year fixes by 0.2 percentage points to 1.88 percent and five-year terms to even 0.4 percentage points to 2.28 percent.
Wüstenrot, after a 0.15 percentage point rise in March, has risen steadily since March. "In response to the Czech National Bank's steps, we increase the mortgage interest rate by LTV to 80% by March by March, by 0.2 percentage point for all fixations," said Marian Holub, product manager of Wüstenrot mortgages. One-year fixation is from 3.99 percent, three-yearly from 2.34 percent and five-yearly from 2.54 percent.
Raiffeisenbank resisted interest rates until February 8, when interest rates on all fixations increased by 0.2 percentage point. Rates of one-year fixations jumped to 4.09 per cent at 4 percent, and three and five years to 2.49 percent.

The attraction is the fee forgiveness
Rising rates are no longer as attractive as before, and banks are aware of it. They are looking for a new way to lure clients. They deny fees, offer insurance free of charge, extend the offer of fixations and come with the possibility of extended interest rate reservation.
"At least partially, we can offset the increase in rates by forgiving the selected mortgages," Holub said. Loan processing and provisioning is free of charge at Wüstenrot in early March, and the internal estimate of the property is also better.
Wüstenrot also offers a seven-year fixation. "We are responding to the current trend, which shows that clients are increasingly inclined to longer fixations. By expanding our offer we meet them. Nowadays, we can provide today's rates for two years before we actually get a mortgage loan. Clients who finish fixations in just two years can get the current rates with us today, "says Marian Holub.
As of the end of April, Česká spořitelna attracts for the household and real estate insurance for a free year. "Interest rates on the market are slowly rising, so we want to offer our clients other benefits that will make it easier for them to fulfill their dreams and plans," said Marek Petráš, product manager of Česká spořitelna mortgages.

Expobank no longer provides mortgages
While most banks still benefit from a mortgage boom, Expobank has decided to leave the mortgage market. Mortgage loans ceased to provide. In the interest rate sheet, however, it publishes mortgage rates for existing clients and has even increased in mid-February. Fixings for three years increased by 0.1 percentage point to 3.45 percent and five-year growth by 0.14 percentage points to 3.56 percent.

Are you an expat living in Prague and would like to own flat or house? But dont know much about loans?
Do you feel communication with banks is too complicated?
The same conditions as for czech citizens.
Do you need help with searching for property, communication with seller and developer?
Contact us +420 605 502 103

Purchasing an apartment for reconstruction. Earnings or nightmares?

Still rising property prices give the idea of buying an apartment for rebuilding. Prices for older flats are lower and you can also renovate your property by yourself. Then you can either continue to sell or just buy a cheaper one for living.

Buying an apartment for reconstruction can be an excellent investment, but like any other investment, it can change into a nightmare. I personally recommend starting with one smaller flat and gradually gaining experience. Going to a large reconstruction with a view of earning a large sum does not necessarily have to pay.

Have it checked by the experts
Not everybody in detail understands structures, water pipes, gas boilers, floors and other matters that are important in the apartment to check before buying. If you buy a flat in which you need to "just paint" and then find that much more is needed, you can make a substantial purchase on the seemingly profitable purchase.
"I encourage everyone to take with them a person who understands it and calculate the actual costs. Most people do not, and after the purchase they are often surprised that it costs more than they expected. The second point is mitigation and overlooked. It often happens that people think the original electrical wiring is still sufficient. And another ailment is after partial reconstruction badly installed gas boiler in dwellings. Currently we have statistics that 50 percent of the apartments have a technical or construction fault - a bad flue path, over-performance that will cause banging in radiators and so on, "

Apartments to be reconstructed as a business
Nowadays the business of monetizing older flats is desperate. The purchase price must logically exceed the purchase price plus the cost of the reconstruction. However, the costs associated with the transfer of real estate and other administrative fees must be included.
"In general, I can say that this method is profitable in more expensive locations such as Prague and most of the regional cities. Investing in older flats to be redeveloped is worthwhile at this time when housing prices are really high. The question is whether you make such an apartment for your own housing or want to sell your property for profit. The advantage of buying a flat to be reconstructed for your own living is the length of the reconstruction and the profit. If you plan to live in an older flat, you do not have to worry about how long the reconstruction will last. You can edit rooms as needed and according to the financial situation. To address this, you do not have to pay back the investment, or just in the long run, as a deposit.
"The problem is with the purchase. You have to be really lucky, because there are relatively many people who want to implement a similar scheme. In addition, some owners' communities have realized this, relatively simple, of sticking to their budget, "

Current mortgage rates: increasing continues

We will definitely not be expecting pre-Christmas sales of mortgage loans this year. The Czech National Bank (CNB), which started in November, continues in December. Banks are on the running belt, and this is definitely not the end.
The rise in the CNB's key interest rates was the impetus for the rise in mortgage lending in November. During November, mortgage rates from smaller banks also increased.
At the beginning of November, Česká spořitelna raised its three-year fixation by 0.2 percentage point to 2.59 percent, but five years only by 0.1 percentage point to 2.29 percent. ČSOB increased its annual fixation in mid-November and reached 3.59 percent at the rate of Česká spořitelna. The other monitored rates increased ČSOB by 0.1 percentage point to 2.39 percent.
Mortgage Bank continues to rise
Hypoteční banka raised interest rates on mortgages initially on November 13 and further growth is scheduled for December 6. In November, one-year fixations grew by 0.2 percentage point to 3.49 percent and three and five years to 0.19 percentage points to 2.49 percent.
December's price increase of 0.2 percentage point will affect all mortgage loans except for three-year fixations. They exacerbate by 0.1 percentage point to 2.59 percent. Interest rates on one-year fixations will increase by 0.4 percentage points to 3.69 percent and to five-year fixations by 0.3 percentage point to 2.69 percent in less than a month.
Rates grow on all fronts
The last November day decided to raise Moneta Money Bank rates, and at the beginning of December, Expobank and mBank joined it. While Moneta increased all fixations by 0.1 percentage point to 2.47 percent, mBank leveled more strongly in rising rates. Three- and five-year fixations increased by 0.35 percentage point to 2.09, respectively. 2.29 percent.
Expobank changes interest rates practically every month. The change was not brought in December. Expobank again raised the rates of all fixations tracked. The most significant thing this year was the increase in five-year fixations, which rose by 0.18 percent to 3.78 percent. The three-year fixation rates increased by 0.13 percentage point to 3.69 and year-on-year fixations by 0.08 percentage point to 4.39 percent.
Interest rates below two percent are becoming scarce. Five-year and three-year fixation is below Fero Bank and Equa Bank. Sberbank and Wüstenrot have decided not to exceed this limit for only three-year fixations.
At the beginning of the week, Raiffeisenbank offered mortgages on its site at 1.89 percent. Although rates rose to 1.99 percent in November, the information did not update on the site. Since December 4 rates have risen again, even by 0.3 percentage points to 2.29 percent. And this time, the update was delayed and the web site appeared with a two-day delay. This rate can be fixed for three or five years. One-year fixations begin at 3.89 percent.
We will not avoid further rate growth
Mortgages are still very cheap, but we will not avoid further rate growth.
Czech wages grew even in the third quarter of 2017, but their growth of 6.8 percent remained at the CNB's expectations. The likelihood that the central bank will raise rates once more this year at its December meeting has thus decreased. "In our baseline scenario, we have calculated further interest rates growth in December, but now the bank council can decide and wait in the light of wages," said Jan Bureš, chief economist at Patria Finance.
Given the CNB's intention to return three-year rates to three percent, further interest rate growth next year is unavoidable.

How to properly buy an apartment at AirBnB?
First of all, you need to look for the right place. We provide our clients with a search service, including video tours and detailed calculations, so that clients can look up to real-estate properties.
We can see that 80% of the apartments are inappropriate in terms of high prices or poor room layout. Most clients are making this claim and choosing a flat as if it were to be a home. But it is an investment and there are mainly numbers. So, you always have to calculate the purchase price, including taxes and equipment, and look at revenue, tax deduction, management costs, cleaning, service charges and mortgages. And after an overall calculation, the equity should ideally have a yield of around 12% or higher.
What should be purchased for AirBnB?
Especially the right place. Next, the quality and tasteful equipment shown on the web on high quality photos. When managing, then it is the basic point of communication with guests and good cleaning. This is the essence of good references, which they then sell.

You say the right place is important. Is it worth paying an apartment for short-term renting in a city other than Prague?
In another city it is also possible. Liberec is second in the interest of apartments. However, you have to take into account that other cities no longer have agencies to take care of, and professional cleaning companies focused on this type of apartments. So then it is necessary to solve everything personally and this is long-term unbearable and the one who does it for 2 years tries to find an agency that has to recreate the whole profile again, including references, or a big part of it will end, because due to incorrect steps the apartment failed even at a cost, and it was no longer interesting.
Is it also common in the Czech Republic that people hire students to live in the apartment for free but care for them to run short-term rentals?
Yes, I know about two cases from Vinohrady, where a four-room apartment in the original condition rents the room to the owner and takes care of everything. However, it is focused on the lowest category of clients - the backpackers who are the most common problem group. I would not recommend it. We only deal with quality, customer-oriented apartments that would go into 3 to 5 star hotels.

So how to make a rented apartment for short-term rent?
If the apartment is in the right place in the center of Prague, it is necessary to reconstruct it first, if the apartment is older and worn out and then it is equipped with high quality. For an idea - we are investing in an apartment of 50 square meters investment in equipment including kitchens and appliances around 500 thousand crowns. In the case of a flat at the level, most of the work is done only with a redesign, where only a few things are changed and the interior, including general cleaning, is finished. The average price is around 150 thousand crowns.

Is there a rarity in our country in the form of short-term rentals? In the US, for example, it is possible to rent an apartment where Donlad Trump lived as a little boy.
Certainly very unusual places are also in Prague. I know of one houseboat that changes its position during the year. Then it is a superluxurious apartment, which has a terrace on the roof, including a whirlpool overlooking the Castle and Staromák. This is absolutely unique. On the other hand, there is also a rental available where you sleep in a small gym on the ground on a ravine.

Current mortgage rates: The CNB did not bounce rates

The mortgage market is experiencing a quiet period in the autumn. Rates are almost unchanged and the mortgage action is counted on the fingers of one hand. Cheaper rates offer only Raiffeisenbank for certain loans, and Expobank has been lobbied for its cost. However, the change can be brought early by the CNB.
Autumn Hypodny at Raiffeisenbank
Traditional Autumn Hypodny run at Raiffeisenbank from September 13 to November 30, 2017. "Despite growing pressure on interest rates, we have chosen to keep our Hypodny tradition and make our clients a special offer for the autumn. Mortgage loans can be won by default at a rate lower by one percentage point, and they will receive 6,000 crowns on their account immediately after signing the contract. A discount of one percentage point will be obtained by anyone who sets up an account and actively uses it. Instead of 3.09 percent, you will get a 2.09 percent rate. However, Raiffeisenbank offered the same rate last month, rising from 1.89 to 2.09 percent As a result, the area for mortgage interest rate discounts has been found by Raiffeisenbank for targeted mortgages ranging from three million crowns to LTVs of up to 80 percent and a three-year fixation for which it lowered the rate by 0.2 percentage point from 2.09 percent to 1.89 percent . The standard interest rate thus remains at 2.09 percent.
The CNB waits until November
The list of autumn mortgage events ends. However, the Czech National Bank (CNB), which did not raise key interest rates last week, is likely to bring about a stir in the mortgage market, but it is likely to do so in November.
At 95 percent, the CNB will raise rates at the November monetary policy session. The likelihood that this rate will not increase at this time is about two percent.
Rising rates should continue next year. The year 2018 will mark the tightening of currency bolsters - and perhaps the rise in mortgage lending rates in the Czech Republic - regardless of the fact that the CNB has yet to wait.
In our opinion, the CNB will not only raise interest rates in November, but it can also declare clearly that it is launching a longer cycle of interest rate increases, ie it will raise rates repeatedly. The CNB has already indicated after the last session, when it stated that the current forecast is a consistent increase in rates "over the next two years.
Further growth in mortgage rates is therefore unavoidable. The question remains, to what extent and how quickly the growth of base rates will reflect on interest rates on mortgages. The bank's competitive struggle will still play its part here.
Although some of the reaction banks were almost immediate at the last August increase, the average mortgage rates of the Fincentrum Hypoindex have not yet materialized. "The moderate rate increase in August, which some banks have responded to in response to CNB's moves, will only be reflected in the second half of August in contracts," said Josef Rajdl, chief analyst at Fincentrum.

Real estate is increasing. Are dreams about your own living melting?

Growth in apartment prices did not stop this year not even in the second quarter. The new apartments in Prague grew by an average of over one quarter and older by 18% in six months. Is it worth to buy your own apartment, or is it better to rent?
After an extraordinary increase in the quarter, the first interest in mortgages was not raised even in the second quarter. The volume of mortgages provided by the Czech Statistical Office (CSO) increased by 25.7 billion crowns. Those who are interested in housing are not even repelled by rising real estate prices.
Older flats grew by almost a fifth
Year-on-year growth in real estate supply prices reached 9.5 percent in the second quarter. Real estate prices were higher in Prague. Also, the realized prices of older flats accelerated their growth quite significantly. In the whole Czech Republic, they grew by 18.7 percent year-on-year, 18 percent in Prague.
People are motivated to buy their own housing not only at low interest rates but also on rising wages. The average monthly wage grew by 7.6 percent in the second quarter to 29,346 crowns. The courage to sneak into the purchase of one's own apartment is also provided by people on the labor market. According to CZSO statistics, the work in the second quarter was by most people in the history of the independent Czech Republic.
"The creation of new jobs has accelerated significantly during the first half of the year. At the end of June, the Labor Offices registered 183.5 thousand.
New apartments are in the course despite price rises
Prices of new buildings are also rising. According to Ekospol's statistics, in the second quarter of this year 1,998 new flats were sold in Prague for 9.88 billion crowns. At the end of last year, the average price of the sold apartment reached 4.9 million crowns, in the six months it was already 6.18 million crowns. As a result, the buyer bought a new flat in six months for CZK 1.28 million.
"Traditionally, most people had to pay for housing in the center, Prague 1 being the most expensive, with an average price of 12.69 million crowns sold. On the contrary, from the point of view of finance, Prague 9 is best placed, where the average apartment is just 4.92 million crowns. Nowhere else does the average price of a new flat bought under the five-million-dollar limit, "Matyáš Hančl, the main analyst of Ekospol, says.
And prices will not stop right now, but it can slow down. "Prices are rising mainly due to the long-term shortage of quality apartments in personal ownership. I expect the growth trend to continue, but at a slower pace, "said Real Estate Manager Reality IQ, Ondřej Mašín.