Bargain brno brimming with potential

With high capital growth and high rental yields, the Czech Republic’s second city is ripe for investment, according to Property Secrets…

The combination of high capital growth and high rental yields is a dynamic that every property investor is in search of, yet it seldom occurs. In certain conditions, when the market is right, it can be achievable but investors must act very quickly indeed to reap the rewards.

Simon Tweddle, Chief Analyst at Property Secrets, comments; “If you can time such a market correctly you can buy at a period of high rental yields, and just as the capital growth rate starts to increase rapidly.

“Hence you enjoy good yields compared to your purchase price and can ride the wave of capital growth, and as you have good rental yields it allows you to refinance some of the capital growth in a couple of years’ time to reinvest again yet still cover your mortgage.”

Knowing when to strike

The difficulty is knowing where and when to strike and which property markets look like they have the potential to provide such lucrative conditions. At Property Secrets we believe that Brno, The Czech Republic’s second city, is showing these conditions right now.

Simon Tweddle, adds: “3-4 years ago the Brno property market went through a phase of very high growth, and rental prices, while fairly healthy, remained static. Unfortunately, the market in Brno was not financially mature enough to support such high growth at the time, and affordability issues kicked in.

“Due to a lack of affordability many people were forced to rent. There has always been a lack of supply of rental property in Brno (often meaning low voids for investors) and this problem was exacerbated.”

“For the two years after EU entry there has not been enough rental property in Brno to satisfy demand and thus rental prices have increased substantially – almost to the point where they are at the same levels as Prague, yet property prices are half the price! Now we are in a position where there is good affordability to buy in Brno but with the legacy of a good rental market too.

“This is leading to a healthy increase in property prices that is much more sustainable now as more and more people have good jobs with salaries that are rising and also access to better mortgage credit. Rental yields of between 5-8% are possible, yet capital growth is currently at around 15% per annum, and is in a classic second wave of its growth phase.

“But if you want to catch such lucrative conditions, you have to act very soon as the capital growth rate shows no signs of abating and rental yields will start to get squeezed.”

Perfect place to buy

On top of all this, foreign investors can get access to great finance deals of 95% LTV with interest rates of 4.3% meaning they have to put very little of their own capital down to reap these fantastic rewards.

Investors are also able to refinance, which means after 2 or 3 years of 15% growth, investors can release their equity, tax free to reinvest in alternative property or other markets seeing this same trend.

Simon Tweddle concluded: “For investors who want an all round excellent combination of low risk, good rentals, steady capital growth and great finance, then Brno, The Czech Republic’s second city is the perfect place to buy right now.”