When does it make sense to sell a property in Prague?

Hardly ever. Why? The price of real estate has been rising in the long term (the word long-term means several decades, in the short term, real estate prices can also fall), it is safe money and therefore we should always think seriously about whether to ever sell. However, the long-term increase in the price of our property has one condition: the property must be in the right location. There are basically two types of right location:

a town with high employment, where

• a wide range of employers with various branches of business operate, consequently the decline of one area or the restriction of the business of one employer will not jeopardize employment. There is a constant influx of new employees into such a town and they need to live somewhere, either in a rented property or in their own, therefore creating demand for real estate, the price of which may rise. This is Prague.
• a recreational area that is accessible from a town with high employment as described above or is popular with town dwellers as described above. The town people want to have weekend houses and apartments exactly in these places, so they constantly create demand for real estate, the price of which may rise.

On the contrary, a bad location is a town with low employment or it can also be a beautiful rural location which is, however, not particularly popular for recreation. In such places, the demand for real estate is low, no one moves there, therefore the price doesn´t rise much. High-risk locations include towns dependent on one company or branch of business, where problems in the company or branch can damage the entire real estate market in that place.

There are the following constellations where selling makes sense, let’s have a look:

Sale of family property and subsequent purchase of a new one

If you need to buy a new property to make it your own home and you don´t have enough money at your disposal, you can easily sell your current property. If you carry out the sale and the purchase at the same time and in the right location, you can´t make a mistake, even if the transaction is made at a time when market prices are decreasing or increasing. You swap one for the other one at the same market value (1: 1) and you don’t lose your money.

Sale of real estate unsuitable for rent and subsequent purchase of real estate suitable for rent

You can own a property that you don´t need for your own housing. In this case it is worth considering whether this property is suitable for renting. When using the term property suitable for renting, I imagine a property in the right location as described above, which can be easily and profitably rented, and is not difficult to maintain. This category includes mainly smaller flats in towns, they have a high yield and are rented more quickly to tenants than large flats in towns. With a reservation, an investment in houses can be agreed to (again in the right location), which, however, have the disadvantage of a more expensive maintenance when compared to small town apartments. Also, with reservation, real estate in recreational areas is suitable for investing, where it is necessary to accept the fact that short-term rental is considerably more labour-intensive than long-term. Land is a chapter in its own right. It isn´t so demanding to maintain and keeps its value for a long time, that is if you have it in the right location, you can own it indefinitely without any work included and you won´t lose any money with them, but it won´t bring you a substantial monthly income.

The clear candidates for the sale of unnecessary real estate and the subsequent purchase of other real estate for rent include:

• large flats in towns
• houses in wrong locations
• commercial objects in wrong locations

Here, the swap – that is, the sale of property unsuitable for rent and simultaneous purchase of property suitable for rent and in the right location – should bring you long-term benefits, either in the form of higher regular rental income or more secure retention of value.

Speculation

For those of you who are confident enough, it can be attractive to take advantage of short-term changes in property prices. You have to guess when prices reach their peak, and sell at this point, subsequently keep the money for a few years and buy only when the market drops a few tens of percent. However, there is a catch. It takes strong nerves as you can never accurately estimate the peak prices. The typical example is the current situation where prices have been very high for minimally two years in relation to current incomes, they have been rising up to now and it is not clear whether we have reached the peak or we´ll wait some time for a decline. When waiting for a longer period of time, we get into trouble as to what to do with free money in our bank account because the interest rates are next to nothing and there are few alternative safe investments.