Research (Conseq)
Personal finance  |  January 10, 2013 10:43:10

This year is a good time to buy an apartment. We recommend mortgage financing at a fixed rate


iPoint.cz Current low interest rates on mortgages and falling real estate prices attract new people to buy an apartment. The average interest rate fell in November 2012, according to Hypoindex index, calculated Mortgage Bank, to 3.25 percent per year. Since its peak in 2009 and declined by 2.5 percent. The average mortgage (in the amount of CZK 1.7 million and maturity of 20 years) reduced installment of CZK 11,900 per month for 9600 CZK per month, if we do not take into account fees. Quite significantly diminishing the price of apartments. Prices of older homes peaked in the third quarter of 2008. Since then decreased eg Prague by more than 15 percent.Thus we can say that we are one of the best moments to buy an apartment for the past few years.

Source: Czech Statistical Office

The greatest risk at present consider the possibility of a further decline in real estate prices.   The price level is currently being held just low interest rates, the central bank recently brought practically to zero.   An increase in interest rates, I believe that the interest on the mortgage decreases, which will have an impact on the demand for apartments, and thus their price. When buying a property I would not recommend it to finance a mortgage rather than buying in cash.

Repayment mortgages based on the annual interest rate and maturity:

 

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3.25%

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4.25%

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5.25%

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5,546

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5,929

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6,326

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6,738

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25

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4,873

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5,278

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5,701

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6,141

2.75%

3.00%

3.50%

3.75%

4.00%

4.50%

4.75%

5.00%

5.50%

5.75%

15

6,786

6,906

7,027

7,149

7,272

7,397

7,523

7,650

7,778

7,908

8,039

8,171

8,304

20

5,422

5,672

5,800

6,060

6,192

6,462

6,600

6,879

7,021

4,613

4,742

5,006

5,141

5,417

5,558

5,846

5,992

6,291

30

4,082

4,216

4,352

4,490

4,631

4,774

4,919

5,067

5,216

5,368

5,522

5,678

5,836

Source:   Own calculation

When buying an apartment is a need to carefully consider the particular location, which, together with the acreage strongest determinant of prices.   When selecting a mortgage, I would prefer a fixed interest rate before the variable which, when rising interest rates may bring unpleasant surprises.

Deregulation of rent:

I believe that the impact of deregulation of rents will not be high. In some parts of the city of Prague and several other cities already exceeds the regulated market rent. In some parts of Prague 6 is in turn regulated rents recently moved about 37 crowns per square meter per month, an amount that certainly does not allow owners to keep the apartments in good condition. Removing regulation reduces market rents and the absurd situation where in the same house for the same flats people pay different rents.    

Investment in real estate:

Ordinary investor will hardly be able to buy commercial real estate complex. An alternative is to either purchase real estate mutual funds or shares in companies focused on the development and management of real estate.   An example of such a fund is Conseq Real OPF. The companies in our Central Europe, engaged in the renting of real estate, is for us the most interesting Austrian company Atrium. The advantage of such an investment is saving the time that would be necessary to manage their own property.

 

 

 

Vojtech Iron,

Portfolio Manager

Conseq Investment Management, Inc.

 

 

 

 

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Letos je vhodná doba ke koupi bytu. Doporučujeme financování hypotékou s fixní sazbou

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