International Property News
Land speculation blossoms thanks to new zoning plan
14th April 2008
Land speculation in Prague is gaining momentum. Real-estate brokers estimate that interest in non-building plots has more than doubled in the past two years.
The interest is due to preparation of a new zoning plan, drafted under the supervision of Prague City Hall. The new document could change some (so far non-building) plots into building land, increasing their value. In many cases, the price may jump by hundreds of percent.
But City Hall officials say this is only the beginning.
"I think speculative purchases will grow markedly only in September, when the new zoning plan concept has been finished," Martin Langmajer, Prague councillor in charge of zoning, told Aktulne.cz.
At the moment, the individual city districts are sending their ideas for changes in their territories to City Hall. The deadline for the proposals is end-April.
Thousands per metre
Non-building land on the outskirts of Prague has been selling at CZK 50-300 per square metre in the last few months, but the price of building plots in this area typically reaches CZK 2,000-5,000. To a considerable extent, the price depends on what you can build on the plot whether the land is suitable for a house or rather a warehouse, for instance.
Real-estate brokers say buyers are interested above all in land in Letnany, Kbely, terboholy, the rka area, Modrany, Zlicn and Radotn. Small and large investors are interested in the land.
Big players include, for instance, the developer Orco Property Group, which bought land in Trojmez, between Sporilov and Hostivar, some time ago. It cannot build on the land now, and the plots now lay fallow in Orco's portfolio. But Orco believes the new zoning plan will change the function of the land, and that it will be possible to build blocks of flats there.
Well-known land speculator Milo Cervenka has bought land in the same area.
But Trojmez is not the only example of speculative purchases. Czech-Slovak investment group Penta Investments will also see its money appreciate thanks to real estate deals. Penta has bought land under a future runway at the Prague-Ruzyne airport.
Penta's Zdenek Kubt told the media in 2005 the group had bought the land from the original owners at about CZK 500 per square metre, which was about CZK 100 more than the Czech Airport Authority, predecessor to the Prague Airport company, had offered. Penta will now obviously sell the land to the airport at a higher price. Rumour has it the price may reach CZK 8,000-12,000 per square metre. But this case is distinct because the value of the land was not affected by a change in the zoning plan. At the time of the purchase, the zoning plan already included the runway.
Land speculation is not a Czech specialty. It is usually legitimate and takes place before zoning plan changes throughout the world.
But one cannot always be certain that zoning plan changes will meet the new owner's interests. "For now, these deals are very risky, because the land may or may not appreciate," says Langmajer.
Prices might also fall sharply, he adds. "The land that is now tagged as suitable for construction may change to non-building land with the new plan. In some places, it has turned out a park might be better than houses," Langmajer adds.
The new zoning plan, to be drafted in September, should take effect in 2012.
Current building land prices in Prague:
Locality Average price Minimum price Maximum price
City* 5,344 700 46,850
Outer centre** 3,238 400 10,630
Outskirts*** 2,305 100 9,030
*e.g. Mal Strana, Nov Mesto, ikov, Vinohrady, Smchov, Nusle
** e.g. Modrany, Stranice, Veleslavn, Kobylisy
*** e.g. Kbely, Zbraslav, Zlicn, terboholy
Prices in CZK/sq m. Source: City Hall
Source: Prague Monitor
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