Český Objektiv

Transparency in the Czech real estate market

An effective method of land registration in the form of a web accessible Cadastre is now operating in Czech Republic. This would, on the face of it, seem to be good news, however when one considers that the information recorded in the Cadastre is not guaranteed to record true ownership data [and consequently should not be relied upon], the value of this data to a buyer becomes significantly reduced.
The above is an example where transparency needs to be improved in the real estate market in Czech Republic. There are many other examples which contribute to lack of transparency including:

• The lack of accurate price, data and general knowledge within the market
• Widely varying values
• Practices generally adopted by agents and lack of regulation
• Timescales involved in completing a transaction due to bureaucracy
• General accessibility to public data [when in theory this should be accessible]
• Accessibility of the market to foreign buyers

A high degree of market transparency resulting from better accessibility to information related to the property and its value, directly influences the degree of activity in the market and consequently thus might be considered to be a prerequisite for an effective and free functioning property market.

According to a recently prepared world wide real estate transparency index, the Czech property market fell within the third group of 56 included countries. The index divided countries into five groups which were ranked on a scale from ‘a very high level of transparency’ down to a ‘totally opaque market’. The Czech real estate market belongs to the middle level of transparency, but has moderately improved since the last research was undertaken in 2004. Among other countries in this third group are countries such as Poland, Hungary, Slovenia, Israel, Greece, Russia and Slovakia [which came in immediately below the Czech Republic]. Other research conduced by Transparency International showed that the Czech Republic was ranked 46^th alongside Lithuania and Kuwait. Although Czech Republic has made progress in the last year, it still trails compared to the rest of the European Union.

Frankness and transparency in the market cannot be adopted, but must be learnt. It follows that there must be a will to learn, if such changes are to be implemented which will improve transparency. Since the stormy nineties, there has been significant progress in the residential property market, powered by increasing economic growth and also by accessibility of mortgages. The ambition of Czechs to live in their own property coupled by historically low borrowing rates has led to a boom in residential housing.

Strong competition amongst service providers is now beginning to result in increasing quality of service which itself leads to higher transparency. However the will to adopt techniques to improve transparency remains largely absent, especially at a political level. Government action is needed to support transparency initiatives by formulating policies which will:

1. simplify and quicken property transactions;
2. increase the accessibility to the real estate information (property characteristics and value)

However today, given the strength of the market, many would argue that the market is sufficiently buoyant without improvement for the time being.