Central Group starts selling investment rental apartments with guaranteed 5% annual appreciation
Central Group, the largest residential builder, is coming up with a very interesting real estate and investment product that is not yet available in the Czech Republic. In the Harfa Invest project in Prague 9, it is starting to sell investment apartments for long-term rent with a guaranteed appreciation of 5% per year. This will be done over a period of 2.5 or 5 years from completion, at which time Central Group will rent the apartments to clients. In 5 years, the investment can thus appreciate by the contractually guaranteed 25%. However, the real return in practice can be significantly higher for clients.
When investing in the purchase of a new apartment in Prague, it is possible to count on two ways of appreciation of the invested money. Firstly, rental income and secondly, appreciation due to the rising price of the property over time. This appreciation over time is usually significantly higher than the rental income.
OVER THE LAST 10 YEARS, HOUSE PRICES HAVE RISEN BY 150%
Buying a home is traditionally seen as the safest and most profitable investment in the long term. According to statistics, in the last 10 years alone, offer prices for new flats in Prague have increased by 149% and sale prices by 162%. This corresponds to an appreciation of about 15% per year! Add to that any rental income. By contrast, returns on savings in banks are falling and the significant decline in appreciation on deposits will continue.
The Czechs are generally a thrifty nation. According to CNB data, people in the Czech Republic have more than CZK 3.6 trillion in savings in bank accounts. However, Czechs are very conservative when it comes to investing. That is why investments in buying new flats are so popular in our country. It is a clear and understandable product with easy liquidity. The attractiveness of investing in the purchase of an apartment is now growing significantly in view of the sharp decline in interest rates on bank deposits. Central Group, as the first developer on the Czech market, is now reacting to this trend by creating a completely new programme "Investment rental flats".
SALE OF NEW APARTMENTS OPTIMIZED FOR RENT
"We fully believe in the quality of apartments in our locations and in the long-term growth of the real estate market in Prague. That is why we have created a completely new program of investment rental apartments for our clients, based on which we can guarantee an appreciation of the investment by 5% per year. This is the minimum contractually guaranteed appreciation. In reality, however, clients can achieve a significantly higher appreciation due to the expected growth of apartment prices over time," says Dušan Kunovský, founder and head of Central Group.
In the new Harfa Invest project it will be possible to choose from 134 investment flats from 1 + kk to 3 + kk intended for long-term rental. The apartments are already under construction and will be completed in December next year. This is a very popular location of Harfa in Prague 9 and Central Group is building investment rental flats right next to tram stops and only 3 minutes from Českomoravská metro station and Galerie Harfa shopping and entertainment centre.
12.5% YIELD GUARANTEE IN 2.5 YEARS OR 25% IN 5 YEARS
"We know from our statistics that about a third of clients buy an apartment as a rental investment. And it is for these clients that we have prepared our new Harfa Invest project with investment rental apartments. If this programme proves successful, we plan to sell one third of our apartments under this programme in the future, in different locations. We could supply more than 500 investment rental apartments to the Prague market every year," Kunovský adds.
The new apartments in the Harfa Invest project have a special higher rental standard of design and also partial equipment optimized for rental purposes (kitchen, built-in wardrobes, bathroom equipment, etc.). The client can choose from two design variants of the apartment, namely Modern or Classic.
The sale of apartments in the Harfa Invest project is subject to the provision of subsequent management and rental of the apartment by Central Group with a guaranteed appreciation of 5% per annum, depending on the client's choice, for a period of 2.5 or 5 years from completion. The guaranteed appreciation of the investment for the client is therefore 25% if the client chooses the 5-year programme or 12.5% if the client chooses the 2.5-year programme.
THE POSSIBILITY OF KEEPING THE APARTMENT IN POSSESSION OR RETURNING IT
At the end of 2.5 or 5 years from the date of completion, the client can return the apartment to Central Group and get back the full price of the apartment with an increase of 12.5% or 25%. Alternatively, the client can retain ownership of the apartment, in which case he or she will receive half the return (paid to the client on a monthly basis from the date of approval in the form of rent from Central Group), but will also benefit fully from the increase in the value of the apartment over time.
For a period chosen by the client, the apartment will be managed and rented by Central Group, which will pay the client a regular monthly rent equivalent to half of the guaranteed yield, i.e. 2.5% per annum. Central Group will then offer the apartment for sublease and will guarantee a regular monthly rental income to the client free of charge and without any worries for the client. This is even in case the apartment is vacant or there are any problems with the subtenant. At the same time, during the entire period of the lease, Central Group will cover all payments related to the apartment at its own expense, including insurance and real estate tax.
After 2.5 or 5 years from the date of approval, the client can either entrust Central Group with the continued renting and management of the apartment, or the client can continue to rent the apartment independently. Or he can dispose of his apartment in any way he wishes - for example, live in it himself or sell it at a profit.
MORE SECURITY OF INVESTED MONEY THAN IN A BANK
When buying an investment rental apartment from Central Group, clients have greater security of invested money than they would have when depositing it in any bank. Deposits in banks and savings cooperatives are insured by law only up to EUR 100,000 (currently about CZK 2.5 million), and the client could lose the rest of his/her money in case of bank problems.
However, in the case of purchasing an investment rental apartment from Central Group, the client has the apartment in his possession upon completion and thus has 100% security. And before that, until the apartment is completed, he can take advantage of the new financial program "Securing the paid deposit with collateral".
BENEFITS OF INVESTMENT RENTAL APARTMENTS FOR ALL PARTIES
Currently, about one third of the apartments on the Prague market are sold for investment. In housing projects, permanent owner-occupied housing is often mixed with shorter-term rentals. The coexistence of apartment owners and tenants sometimes brings problems. Conventional apartment buildings are also not adapted to rental housing, which has its own specificities.
Whole apartment buildings, which are designed and built for renting from the outset, bring a number of advantages. It does not matter whether the whole building is owned by one institutional investor or whether the individual flats are owned by different small investors who then entrust one company to manage and secure the rental. The whole system then works professionally and significantly more efficiently than individual management and rental solutions. This is true for both the owners of the flats and the tenants.
"Our investment rental flats programme also ensures that all such flats make it onto the rental market, helping to address the current housing crisis. With professionally managed and rented apartments, there is also no concern about providing tenants with long term tenancies to increase their security and comfort. The creation of investment rental apartments is also beneficial for the state, because unlike individually rented apartments, there can be no tax evasion from unreported rental income under this system," concludes Kunovský.
Source: Central Group
