There are many positive factors that will ensure that residential properties in the Czech Republic enjoy a healthy period of growth throughout 2007; but those looking at commercial property as an industry sector for investment should be aware that 2007 could bring a surplus of supply.

The first thing to note about the Czech Republic is that an investor needs to be aware that the majority of his rental or resale audience will be local buyers because the nation does not have massive tourism appeal away from the capital city of Prague. Therefore it is important to examine the state of the economy in the Czech Republic to forecast what consumers may be spending any income they have on in the near future.

The good news is that the Czech Republic has an affluent economy and its people are becoming more active consumers as they have increased and more affordable access to credit cards, loans and mortgages. Going in to 2007 consumer spending patterns in the Czech Republic are very strong and are proving that there is affordability in the market and this affordability is likely to be transferred to the real estate marketplace in increasing amounts throughout 2007. As stated, the majority of sustainable demand for properties for sale and rent in the Czech Republic comes from the local population therefore it is very significant that both affordability and demand are strong at the moment. This is a good time for well located and managed investment purchases of property to be made in the main towns and cities across the nation.

On top of this positive news there is one significant factor that will further drive the property market in the Czech Republic in 2007 and that is the fact that 2007 is the last year constructors and developers can apply a reduced value added tax rate to properties. From the 1st of January 2008 this compulsory tax will increase by a whopping 14% and therefore demand for properties for sale in 2007 is going to be intense.

Investors should consider buying properties off plan and securing their price at 2007 levels because anyone wanting to buy in 2008 will automatically have to pay more for the same property because of the tax hike meaning that such an investor will be able to sell on properties in the near future for a decent profit margin.

In terms of what to look at, well apartments in Prague are the most in demand and expensive property commodity in the Czech Republic…in 2006 the average price of an apartment in the most sought after areas increased by 30% with gains of between 10 and 20% easily achieved across the city. Because demand for well located apartments in Prague is not abating and actually annually exceeds the number of units coming to the market, despite the fact that asking prices are high and price gains have been strong in 2006, 2007 will be another excellent year for the apartment rental and resale market in Prague.

Elsewhere in the Czech Republic, with house prices just 38% of the EU-15 average price there is a strong chance of growth fueled again by a demand versus supply situation where not enough stock is available to the consumer who has more ready cash available in terms of income and loan values to fund a purchase. Investors should look at areas already affluent where there is the chance to buy and renovate or modernise property and locations set to benefit from infrastructure improvements or developments or the establishment of new employment opportunity.

Finally, going back to the commercial property market, recently this has been an excellent area to invest in as demand was intense for everything from retail space to logistics and warehousing…however, an increase in demand resulted in too many constructors developing space and 2007 is the year that hundreds of thousands of square feet of space will be completed and brought to the market just at a time when demand has eased and vacancy rates are rising.