Although the legislation is still only midway through the necessary process, the bill can be expected to clear the Senate and be signed by the president before the autumn elections. Property investment in the Czech Republic will thus change significantly – newly, an opportunity to get involved will open up for pension funds as well. In the West, private pension funds investing in houses and flats is a fairly common practice, as these are relatively safe assets with steady growth in value and a minimum of associated problems.
An attractive investment, but with a limit
Under the approved proposal, a given pension fund's total investments in real estate may never exceed 20% of its overall assets. It will therefore not be possible to set up new funds focused exclusively on property investment while being subject to the same legislative framework as other pension schemes. The investment itself is made through a qualified investors' fund or another legal entity, with the rule that each pension fund may allocate a maximum of 10% of its assets to any single such project or set of projects. This mandatory diversification aims to further bolster confidence in the safety of pension funds.
Money isn't the problem
Finance Minister Zdeněk Stanjura presents the proposal as a means of tackling the housing crisis in the Czech Republic and believes that passing the act will speed up construction, above all of rental flats. Industry associations (the Czech Banking Association, for instance) have also spoken positively in the past, but add that money alone will certainly not fix the situation. In the case of pension funds, the figures mentioned run to as much as 20 billion crowns over a five-year horizon that could, on paper, flow into housing.
Property investment has always been a recipe for a peaceful retirement; once the new law is passed, that may be doubly true
But developers (and the political opposition led by ANO) point out that the problem on our market right now is not a lack of capital, but bureaucratic obstacles that considerably slow down building proceedings and effectively make it impossible to build even for those who would like to break ground as soon as possible and have the necessary capital behind them. The notion that pension funds as such will actually build any new properties is entirely mistaken. Incidentally, the market also lacks enough qualified workers, something builders often solve in creative ways.
Bad news for buyers
In the worst case, increasing the number of players on the market competing with one another to acquire flats for their portfolios could paradoxically make things even worse, above all for those planning to buy a home of their own in the coming years. We looked at the growing influence of institutional investors on the Czech property market in a separate article some time ago, and it is certainly a trend worth keeping an eye on in the future as well. Would you like to rent out your investment flat without any worries? By working with a professional property manager, you can stop watching the ups and downs of the market – we guarantee that we will find the ideal tenant and offer them your flat at the current market price. For more information about the FLAT SERVICE Partner and Garant services, call +420 277 000 330 or write to sales@flatservice.cz.
