The myth of the brick: Why is housing investment in Prague often overvalued?

In the advisory group smpl_ we are not guided by feelings, but by data. To challenge the perceived belief that Investing in an apartment is automatically the best and safest route to wealth, it is in Czech Republic unpopular. In our Detailed video analysis oneself Kirill Juran looked at why most real estate investors rely on myths instead of cold math.

Why do investors in Prague often miscalculate?

The real problem with investing in real estate in Prague is not in bad apartments, but in bad math. How Kirill Juran disassembled in the video, investors often overestimate their return on equity (ROI), ignoring key indicators and risks.

The most common errors in the calculation:

1. Non-critical growth estimate: Investors are anticipating high growth in purchase prices as well as rents. But the data shows that rent growth often does not cover house price growth and lags behind growth in average wages.
2. Ignoring opportunity costs: The return on the apartment must be compared with alternative investments. Most investors neglect this cargo, which distorts the real ROI.
3. Credit leverage risk: Credit leverage The (mortgage) is, while the main source of high profits, but it works both ways. A small market correction or stagnation in rents is enough to turn an expected 15% profit into a lackluster return, or even a financial loss.

Data Speaks Clear: A Look at Key Indicators (According to Our Analysis)

In our analysis, we relied on hard datathat show that the environment for real estate investors is not as idyllic as it seems:

• Rent growth vs. wage growth: The long-term trend shows that rent growth in Prague is developing separately from the dynamics of wages and the purchase price of apartments. This puts sustained pressure on net profitability.
• Utilization of capital: ROI it is necessary to add to the equity invested (e.g. 20% of the purchase price). Even a slight slowdown in house price growth can cause ROI on invested equity to plummet drastically.

Real return and risk for investors

How Kirill Juran explained in the video, an investor in a property actually earns from three main sources: cash flow from rent, mortgage principal payment, and appreciation (market value growth).

Conclusion smpl_ for investors: Investing in real estate is not a safe game, but a strategic decision. It requires a cool head, detailed work with numbers and critical comparisons with alternative investments.