Mortgages for foreigners

07/11/2024

07/11/2023

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16/10/2023

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16/10/2023

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08/08/2018

Are you an expat living in Prague and would like to own flat or house? But don´t know much about loans?
Do you feel communication with banks is too complicated?
The same conditions as for Czech citizens.
Do you need help with searching for property, communication with seller and developer?
contact us +420 605 502 103

18/06/2018

The CNB strikes against mortgages again

The way to the mortgage is even more winding. The Czech National Bank (CNB) has come under the guise of consumer protection for further tightening of mortgages. Starting in October, two new mortgage restrictions will be introduced. Freed and young will have to make a living with their parents or rent, but it will also make them bigger.
Concerns about mortgage buyers were filled with the latest financial stability report after the CNB's Tuesday press conference. As of October 1, the CNB, in its recommendations, introduces requirements for the borrower's borrowing rate.

Debt indicators in the CNB's viewfinder
The DML will not be more than nine times its annual net income (the DTI indicator) and the monthly debt repayment will be less than 45 percent of its net monthly income (DSTI indicator).
In specific cases, the set DTI and DSTI values will be exceeded, but only five percent of the loans. Jan Frait, director of the Financial Stability Department, said the new measures are focused on new loans only and will not affect loans refinanced.
One year ago, the CNB warned that it considered a high-risk debt repayment higher than 40 percent of the net monthly income and the total amount of debt exceeding eight times the net annual income. The new limits are somewhat milder because, according to the CNB, they should not be a shock or a surprise. Implementation banks give three to four months on the basis of a commitment approved by the Budget Committee in connection with the draft law on the CNB.
The CNB warns that the biggest risks to financial stability are born in good times when both banks and their clients perceive risks as low. And at that time we are now. The Central Bank, therefore, in an effort to protect the household from the debt trap and hence the health of banks, decided to tighten mortgages.

The CNB's real estate prices are not cooling, yet it is ready to strengthen it
And real estate prices are another wrinkle at the head of the central bank. Real estate prices grew in the Czech Republic most of the year, most of the EU, by an average of 16 percent. There is also an overvaluation of the prices of apartments, which, according to the CNB estimates, reaches 15 percent.
The conditions for spiraling the spiral between real estate prices and loans for their purchase continue to remain, according to the CNB. The current limits of the LTV due to the overvaluation of real estate prices by the CNB are the limit value and the central bank is therefore prepared to tighten it if necessary.

Singles and young families in the narrow
The CNB may intervene up to one third of the applicants. "The tightening of the CNB's recommendation for mortgage lending can affect a quarter to a third of new mortgage applicants
, especially among young people who need to finance their first housing. We assume that as a result of continued tightening of conditions and rising interest rates on the part of the central bank, the popularity of mortgages with long interest rate fixations will continue to grow.
The introduction of stricter mortgage rules will make homelessness more accessible to free people and young families, not only their own, but also their tenants. Singles and young families will be left to live longer, if not for life, in a tenancy. Rental prices, until the economy and consumers get better, will grow in big cities and their surroundings much faster.

17/05/2018

Are you an expat living in Prague and would like to own flat or house? But don´t know much about loans?
Do you feel communication with banks is too complicated?
The same conditions as for Czech citizens.
Do you need help with searching for property, communication with seller and developer?

contact us +420 605 502 103

23/03/2018

Are you an expat living in Prague?
Do you want to buy own place?
Do you want the same conditions as a Czech citizen?
Contact us, we look forward receiving your call.
+420 605 502 103

14/03/2018

CNB: Real estate prices have been overestimated by about 10%

The Czech National Bank (CNB) takes care of the stability of the financial sector. And it may be at risk from real estate bubble. Is it threatening? According to the CNB, the prices of residential property were overvalued by about 10% ...

Real estate prices in the Czech Republic have recently grown the fastest in the European Union. There are several reasons for rapid growth: cheap and still available mortgage loans that households are interested in due to low unemployment and persistent income security in the foreseeable future ... and a limited supply of new flats, especially in Prague and Brno, where bureaucratic apparatus in the building permit.
The rapid rise in property prices does not mean "bubble inflation". However, according to the models of the Czech National Bank, "in the middle of 2017 housing prices were overvalued by about 10%". What can cause overestimation?
Stability of the bank is not jeopardized
In January 2018, the report "Risks for Financial Stability and Indicators", which is complemented by a regular annual Financial Stability Report, banks are sufficiently resilient.
"The results of the macro-rating tests confirmed that the banking sector, representing 80% of the domestic financial sector's assets, is stable overall," the CNB said. But she is very cautious in her assessment. The situation of banks has ceased to improve.
"Some sources of structural risks such as the concentration of bank exposures on the real estate market, increasing investment by financial institutions in foreign assets, and an increase in the share of foreign currency assets in financial institutions' balances remain," warns the CNB.
The Bank's focus on mortgage lending in a situation where the CNB expects to overstate real estate prices by about 10% may be risky for banks as the Czech economy breaks into the opposite phase of the economic cycle - into a recession.
Real estate grows fastest in the EU, but ...
Prices of residential real estate in the Czech Republic have been breaking records for the last year at European level and are growing fastest among all Member States. This would at first glance suggest their overheating and signs of real estate bubbles.
But the second look is no longer so unambiguous. Over the past 5 years, the average Czech property has been staying in the central part of Europe's peloton.
The banks would not be affected by the decline in property prices
Any fall in real estate prices, in theory (and history turned out to be the practice), could negatively affect the stability of banks. Residential real estate serves as a pledge against mortgage loans, which make up a large part of the commercial bank business. If real estate prices drop and mortgage repayment will deteriorate, banks may get into trouble. But this is far from in the Czech Republic.
First and foremost, the share of non-performing loans is still decreasing. "Credit risk, measured by the 12-month default rate indicator, declined slightly during the second quarter of 2017 for home loans and consumer loans," the CNB notes, adding, however, that the decline in credit risk may also include rapid growth in new loans. People with new loans usually take some time to get into financial difficulties and stop paying off properly.
However, the dynamics of providing new loans is slowing. This is partly due to the Czech National Bank, which recommends commercial banks not to provide mortgages with LTV (mortgage to mortgage value) over 90%, and only 15% of new loans should have LTVs higher than 80%. Banks have only listened to the "recommendations" at first, but their discipline has increased in the last few quarters.
Apartment prices are overstated ... wait with the purchase?
According to the CNB, the prices of residential real estate are overvalued by about 10%. This may be a signal that house and family house prices may decline. They may or may not.
Even if real estate prices are overestimated, they may not decrease. In the first place, the "bubble" can inflate to much larger dimensions. However, even if there is no further growth, there may not be a fall in prices. Bubble in the real estate market can be "blown up" by lower price increases in the coming years.
Whether or not price falls (or further growth) does not know. It can only be estimated more or less sophisticated. However, if the developer market could move and turn the economic cycle, it could also decline. Against the displacement of construction, construction laws and rigid building authorities are underway, and the recession is estimated to be on the agenda for a couple of years