| The Prague property market has and continues to see | | | | F&A services to SAP employees, the center also |
| overwhelming demand from both foreign and local | | | | offers customers unique insight into how 'SAP runs |
| investors. And who wouldn't like to own a property in | | | | SAP' in performing these services," said Claus Heinrich, |
| this fairytale city that pulls at your heart strings and | | | | member of the executive board, SAP AG. "The new |
| attracts major foreign investors on the basis of | | | | BSCE here in Prague, with its highly skilled team, is a |
| economics. | | | | key milestone in executing to this strategy." |
| With the Czech economy running red-hot, in fact, at a | | | | November 2005: Pan-European telecommunications |
| stunning 6% last year (2005 GDP), there is good | | | | company Interoute moves their key customer center |
| reason to consider this beautiful capital as a strong | | | | from Great Britain to Prague. Over 100 specialists will |
| investment choice. Czech Republic's results far | | | | eventually be employed here over a period of 3 years. |
| outstripped the average EU GDP growth of 1.6% and | | | | "Our customer centre is based on a different concept |
| those of Hungary (4.1%) and Poland (3.2%). Slovakia | | | | than usual. Its foundation is not administrative workers |
| alone equaled Czech Republic in terms of growth. | | | | but technical personnel, which allows us to provide |
| Economic Indicator - GDP | | | | highly specialized and individual service," said Vladimir |
| 2000/3.9% | | | | Hendrych, Country Manager of Interoute for Central |
| 2001/2.6% | | | | and Eastern Europe. |
| 2002/1.5% | | | | December 2005: DHL continues to see success for |
| 2003/3.7% | | | | their investment in Czech Republic. DHL has invested |
| 2004/4.0% | | | | over 500 million EURO over 5 years into their IT center |
| 2005/6.0% | | | | in Prague. DHL currently employs over 900 at their |
| Not only was 2005 extraordinary in terms of Czech | | | | center. About three quarters of these are Czech and |
| GDP growth but also with the sheer number of new | | | | the rest from 46 other countries. |
| investment projects and with this, the total foreign | | | | "We made the decision to come here in 2003, and |
| investment (FDI). Total FDI in 2005 was more than 263 | | | | since then it has become even more desirable," says |
| billion CZK (11 billion USD) which is the highest figure in | | | | McGuckin, Prague-based managing director of IT |
| history in terms of dollars and second highest in terms | | | | services. He cited Prague's numerous air links to the |
| of CZK. | | | | rest of Europe, its good infrastructure, a |
| Economic Indicator - FDI (USD billion) | | | | business-friendly climate, low wages and low salary |
| 2000/5.0 | | | | inflation for this statement. |
| 2001/5.5 | | | | December 2005: Changhong, a leading Chinese |
| 2002/8.4 | | | | consumer electronics manufacturer announced it |
| 2003/2.6 | | | | decision to build its new television-assembly plant in the |
| 2004/4.0 | | | | town of Nymburk (around 50 km from Prague). This is |
| 2005/11.0 | | | | historic since it represents the first major Chinese |
| However, what does all of this mean with regard to | | | | investment into Czech Republic. In it's first phase the |
| the residential property market? | | | | manufacturer will invest a total of 10 million USD into |
| Higher GDP usually translates into higher disposable | | | | the new factory and employ some 300 people. |
| income for the population. Much of this increase is | | | | "After a thorough screening of the CEE region, we |
| focused on Prague where the average gross monthly | | | | chose the most convenient country for our investment |
| wages was 23 000 CZK as compared to the national | | | | - this being the Czech Republic. The main reason is the |
| average of 18 900 (Q3 2005). | | | | central location with respect to our European |
| Also, unemployment is much lower in Prague | | | | customers as well as the availability of a skilled |
| compared with the rest of Czech Republic. The | | | | workforce," stated Zhao Yong, Chairman of the Board |
| national average is 9% and Prague's is 3.25% (Q3 | | | | of Changhong, adding: "The initial investment is a part |
| 2005). | | | | of our first-phase plan, and other expansion plans are |
| Even the sheer number of tourists in Prague affects | | | | being discussed. This means that a substantial increase |
| property prices as some are purchased for the | | | | in investment and the number of employees is possible |
| short-term rental market. Each quarter in 2005 | | | | in coming years." |
| averaged 950 000 tourists. It is rare to find in Prague | | | | December 2005: The Czech branch of software |
| private accommodation for under 1 400 CZK/night. It | | | | company Microsoft together with the government |
| only goes up from there. A well-located apartment | | | | agency CzechInvest will open a new software |
| with a professional marketing and management | | | | development center in the Czech Republic early next |
| company can make an excellent return. | | | | year known as SoftInvest. 150 to 200 IT specialists will |
| What other major investment news is there that | | | | work on demanding projects in cooperation with local |
| affects your decision as an investor? Here is a | | | | universities to develop new software and innovative |
| selection from 2005 and newer. | | | | solutions. Microsoft in addition is still considering building |
| Other Investment News (from CzechInvest and other | | | | another, this time European, technical support center in |
| news sources) | | | | the Czech Republic. |
| March 2005: Czech airlines (CSA) is establishing a new | | | | "By the end of the year we want to put our intent into |
| repair center in Prague. It will eventually employ up 400 | | | | the form of an fully concrete project. Barring any |
| specialized aviation mechanics and other technicians. | | | | obstacles we will set up such a center as early as |
| 1.35 billion CZK will be invested into setting up the | | | | January," stated CEO of Microsoft CR and SR Jiri |
| facility. | | | | Devat, and added: "The future of the center will be in |
| "The project for this new repair center is based upon | | | | teaming up technical universities on one side and local |
| CSA's long-term strategic plans for developing its | | | | partners from the software industry on the other side." |
| technological base camp for airplane and aircraft | | | | March 2006: Sun Microsystems has officially opened |
| component maintenance and repair in close proximity | | | | it's development center and the new headquarters of |
| to the international Prague - Ruzyne airport," says | | | | its Czech branch in the Chodov district of Prague. |
| CSA president Jaroslav Tvrdik | | | | Microsystems total investment will equal 21.5 million |
| April 2005: Scottish company Incline opened its | | | | USD in development specialists and high-tech |
| high-tech centre in Prague-Letnany which services flat | | | | equipment. By 2008 the current number of developers |
| LCD notebooks, LCD televisions and plasma screens. | | | | (400) is expected to double. |
| 165 new jobs will be created at its new center. | | | | "We are very pleased that Sun chose to locate its |
| "The growing demand of our customers in the | | | | development center in the Czech Republic over other |
| European region induced us to increase our capacity | | | | attractive locations around the world," said Zdenek Pilz, |
| and build a repair centre right in Central Europe," said | | | | general manager of Sun Microsystems' Czech branch, |
| David McKinney, Executive Director of Incline Global | | | | on the occasion of the new development center's |
| Technology Services, and added: "The Czech Republic | | | | opening. "Prague was chosen especially thanks to its |
| was chosen because of its excellent infrastructure | | | | abundance of software-development specialists, |
| and its experienced labour pool. I trust that we will | | | | excellent infrastructure, stable economic and political |
| succeed in building a world-class centre here." | | | | environment, and-of no less importance-the helpful |
| April 2005: Toyota Peugeot Citroën Automobile | | | | attitude of the government as represented by the |
| (TPCA) launches production in the Czech Republic. | | | | agency CzechInvest." |
| Total investment into their new plant in Kolin amounted | | | | Prague Property Figures Property Sale Figures |
| to 1.3 billion EURO. An estimated staff of 3 000 will | | | | These are the figures as of March 27 2006. |
| eventually be employed here. | | | | 68 m2 apartment with 40% wear |
| "The TPCA launch will be one of the factors behind | | | | Average Price 1 986 000 CZK |
| this year's national GDP surpassing the four percent | | | | Increase over last month 6.36% |
| mark," said Martin Jahn, Deputy Prime Minister for | | | | Average Rental 8 972 CZK or 132 CZK/m2 |
| Economic Affairs. "However, there are also other | | | | Increase over last month 0.15% |
| aspects of this investment with material importance for | | | | Apartment Rental Figures |
| our economy, among them the import of modern | | | | These are the figures (CZK/m2) as of November 15 |
| technology and the transfer of the unique | | | | 2005. |
| manufacturing know-how that the entire world has | | | | Please click here to view the chart. |
| tried to copy from Toyota. TPCA has already made | | | | Working with the sale prices per square meter that |
| contact with the Technical College CVUT in Prague, | | | | we can find for Prague properties versus the average |
| planning to tap its pool of top-class experts in order to | | | | rental above we can see that rental yields of 5 to 7% |
| fill key positions in the firm. TPCA is also planning to | | | | are currently possible. With well-chosen properties it is |
| cooperate with other technical universities." | | | | even possible to go marginally higher. |
| June 2005: Computer Associates International, Inc. | | | | The chart also demonstrates that with rent/m2 being |
| (NYSE: CA) declared its intended creation of the first | | | | higher for smaller flats it is also possible to get higher |
| worldwide Mainframe Centre of Excellence in Prague. | | | | yields. Currently the market is flooded with luxury type |
| The new Centre will focus on software development, | | | | flats that are for rent. Investors are being forced to |
| maintenance, validation and quality assurance for the | | | | lower their rates in order to attract tenants. |
| mainframe computing environment. This is estimated to | | | | Because of the above factors we recommend |
| be a 36 million EURO investment. More than 200 are | | | | investors buying flats where the rent would not |
| expected to be hired and trained for this facility. | | | | exceed 12 000 CZK/month. Properties for rent in this |
| Guy Harrison, senior vice president, Development | | | | range are in high demand and an investor will face less |
| Operations at CA said "This Centre of Excellence will | | | | chance of vacancy. |
| provide mainframe users worldwide with a host of | | | | Other Investment Factors |
| innovations, and will help strengthen the Czech | | | | Mortgages are becoming more and more accessible |
| Republic's position as a hub of IT activity." | | | | to Czech citizens. Many of the younger generation are |
| June 2005: Accenture, a global management consulting | | | | going from being cash oriented to facilitating their |
| held the official grand opening of its new facility in its | | | | purchase with mortgages. |
| shared services centre in Prague-Chodov. Accenture, | | | | The Prague suburbs have seen an increased demand |
| who fourteen years ago entered the Czech market, is | | | | for family houses in the last year. |
| expanding rapidly here - employing more than 1,300 | | | | At the end of 2007 VAT is projected to go from the |
| people and continues to expand. | | | | current 5% on new build and newly renovated |
| August 2005: International rating agency Fitch | | | | properties to 19%. When this change goes into effect it |
| upgraded all its ratings of credit reliability for the Czech | | | | is sure to have an impact on the market. It will likely be |
| Republic. It gave the Czech Republic an A for its | | | | spread between increased costs to the consumer and |
| long-term foreign currency obligations compared to the | | | | decreased profits for the developer. |
| previous A-. The short-term currency rating jumped to | | | | With regard to the VAT change please be aware that |
| F1 from F2 and the state's rating ceiling reached AA- | | | | any purchases of projects which finish and receive |
| from A+. The rating for long-term debts in Czech | | | | occupation permission from the local authorities after |
| crowns was also raised from A to A+. | | | | the end of the year 2007 will be susceptible to 19% on |
| "Strong economic growth, continued real convergence | | | | the COMPLETE purchase price. This is a very |
| with Western Europe and moderate external financing | | | | important factor to be protected from in your contract |
| risks support the upgrade of the Czech Republic's | | | | in case projects due to be completed in the end of |
| sovereign ratings," says David Heslam, Associate | | | | 2007 actually run over schedule (an often occurrence |
| Director in Fitch's Sovereign group. | | | | with developers) into 2008. |
| September 2005: SAP AG officially opened its newest | | | | As we've emphasized before, at Czech Point 101 we |
| shared services center, the SAP Business Services | | | | are not going to over-inflate figures or try to sell you |
| Center Europe (BSCE) in Prague, Czech Republic. As | | | | on hyped up facts. Our goal is to inform you to make |
| of September 2005, 132 employees worked at the | | | | the best investment decisions possible. |
| center and they supported 70 countries in 15 different | | | | The sources for this newsletter include the iDnes.cz, IRI |
| languages. | | | | and CzechInvest. |
| "As a high performance company, it is SAP's strategy | | | | For the most update information on the Prague |
| to effectively and efficiently support core internal | | | | property market please visit our page devoted to |
| functions such as HR and F&A throughout the | | | | Prague property and what is happening on the market. |
| global business. In addition to providing HR and | | | | |