Why the ex-communist city of Prague is now one of Europe's hottest spots to buy property

The Czech Republic is home to fairytale castles, Budweiser beer and Bohemians – as in actual residents of Bohemia, as opposed to fashionistas with a weakness for kaftans and crystals.

The central European country is also making a name for itself as a real estate megastar, rocketing up Knight Frank’s Global House Price Index for the last quarter of 2017 with an annual growth rate of 12.3 per cent, sharing third place with Ireland behind Iceland and Hong Kong.

Czech Republic Sotheby’s International Realty chief executive Ilona Mancikova says the luxury segment in Prague is incredibly diverse.

“In the historical centre of Prague, it mostly includes historical buildings, from Baroque palaces to Art Nouveau apartment buildings,” Mancikova says.

Traditional villa quarters are characterised by First-Republic, functional villas, while new high-rises dominate Pankrác.

In the New Town city quarter, the agency is marketing a “design penthouse” occupying the fifth and sixth floors of a late-19th-century house.

The four-bedroom residence features a 49-square-metre roof terrace with panoramic views of the city, underground parking for three cars and a wine cellar.

The price guide is CZK90 million, or about $5.68 million.

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Current market

The Czech economy is now one of the fastest growing in Europe. Photo: Uniworld

For an ex-communist, the Czech Republic is pretty good at this free-market economy caper.

Emerging from the financial crisis in better shape than many of its neighbours, the Czech economy is now one of the fastest growing in Europe, boasting low unemployment and strong real wage growth.

Demand has long outstripped supply in Prague’s most desirable neighbourhoods. Mancikova says the price per square metre in the historical centre can reach CZK360,000 (about $15,000), up from CZK140,000 (about $8700) a decade ago.

Can Australians buy in?

Australians are able to purchase properties in Prague under the same conditions as locals. Photo: Uniworld River Cruises

Foreign buyers can purchase property under the same conditions as Czechs. Buyers must pay a real estate transfer tax of 4 per cent of the purchase price or valuation price – whichever is higher.

Modest annual land and property taxes also apply.

Paying via a notary, lawyer or bank is recommended. Gosford Classic Car Museum owner Tony Denny, a client of Czech Republic Sotheby’s International Realty, says the city offers medieval charm and beauty, with easy connections to other parts of Europe.

“Prices are approximately half of Sydney prices, with good upside potential for capital gains,” Denny says.

Buying into the upmarket Troja neighbourhood in 2000, when he was based in the Czech capital, the Australian still visits the city and keeps his heritage-protected villa as a European bolthole.

What you can buy for…

Vila Vista is located in Hanspaulka, Prague. Photo: Czech Republic Sothebys International Realty

$27.3 million

A five-storey residence in Prague’s Hanspaulka neighbourhood. Includes six bedrooms, indoor pool and seven-car garage.

$6.3 million

An airy, modern four-bedroom house with more than 630 square metres of internal space and a pool about 20 kilometres south of Prague.

$1.5 million

A newly renovated three-bed apartment in Hanspaulka, with dramatic interiors and access to communal pool and garden.