Investing In The Czech Republic - Outside Of Prague - Part 3:
By Nathan Brown, Fri Dec 9th
In the North American school system students seeking to be thebest strive for an 'A' grade. However, the school system is notthe end of the drive to be the best and earn an 'A' grade.Letter grades are used by rating agencies to rank communities interms of investment risk.
Ostrava, in recent times, received an 'A3' grade from Moody'sInvestors Service.
What does this mean to you as a potential investor? What arethe other indicators which would point to the health andprospects of Ostrava's property market?
What does this rating actually mean?
There are 25 rankings from Moodys in the investor services, an'A3' is seventh from the top and is defined as an upper-mediumgrade. A similar grading company, Standard and Poors, also gaveOstrava an 'A' ranking based on their grading system.
What will that mean for the city?
Some investors will only look at cities with 'A' ratings. It isan indicator of the financial and fiscal health of the community.
Since the restructuring of the industry in the 1990s, theeconomic platform of the city has changed substantially. Infact, most of its incomes are no longer dependant on localeconomic conditions.
Ostrava, in receiving this rating, achieved the identical levelof rating as other mid-sized cities in Central Europe. Brno, forexample, also received an 'A3' rating (for a complete discussionof Brno property and economic developments visit our feature onBrno property.)
Let's go through some other indicators as to the investmentpotential for this Northern Moravian city.
Area: 214 km2
Population (latest data April, 2004): 315 000
Road Distance from important European and Czech cities:
City / kms Brno / 170
Olomouc / 93
Prague / 360
Vienna / 310 Bratislava / 300 Warsaw / 300
Budapest / 389 Berlin / 540
Paris / 1 500
With the completion of the D-47 highway the infrastructurecapacity will greatly increase as well as the ease of travel.Travel time to the Czech capital, Prague, will be shortened to alittle over three hours.
Air Transportation:
Ostrava - Mosnov International Airport is located 25 km fromthe city centre. It is the biggest regional airport in the CzechRepublic with a capacity of more than one million passengers peryear (current actual figures are just over 200 000 per year andexpected to triple next year) and a runway 3500m in length and63m wide, allowing it to accommodate the world's largestairplanes. Currently it caters to both domestic andinternational flights.
Although there are currently not any well-known low costcarriers flying into Ostrava we expect it will only be a matterof time.
Average monthly salary for Ostrava region (2004): 18 966 CZKAverage monthly salary for Czech Republic (2004): 18 582 CZK
Average monthly salary for Czech Republic (2005 2nd Q): 18 763CZK
Education: 16.3% of residents in Ostrava have University leveleducation compared to 9.4% Czech wide.
Average temperature in January: - 2°C to -4°C Averagetemperature in July: 15°C to 19°C
(hey, some investors want to know this....)
Economy:
Industrial production has always had a strong factor in theeconomy of the Ostrava region. Mainly its been based on theexcavation and processing of coal and on related branches -metallurgy, the coking industry, the chemical industry, electricpower generation, civil engineering and heavy engineering.Metallurgy and heavy engineering remain the largest employers inthe City.
Some of the Largest Employers in Ostrava
Employer / Business / Activity / Employees (Jan. 2004)
Mittal Steel Ostrava a.s. / Metallurgical production,manufacture of metallurgical and engineering final products / 10968
Faculty Hospital / Healthcare / 3 180
Czech Railways / Transportation and communication / 3 075
Vitkovice Machining / Machining and Metallurgy / 2 697 VitkoviceSteel / Metal production, processing / 1 682 Ostrava BlastFurnace / Metals and coking-chemical production / 1 305
Foreign Investors in Ostrava (by no means comprehensive,only a sampling)
Investor (Country) / Business Activity / Employees (Jan.2004)
Mittal Steel Ostrava a.s. (UK) / Metallurgical production,manufacture of metallurgical and engineering final products / 10968
Vitkovice Tube Mill, a.s. (Cypress) / Steel tube production / 932
Dalkia Ceska republika, a.s.(France) / Heating and ElectricalProduction / 697 BorsodChem MCHZ, s.r.o. (Hungary) / Chemicalproduction / 623 Tesco Stores CR a.s. (UK) / Retail / 580 AholdCzech Republic, a.s. (Holland) / Retail / 529 Hayes LemmerzAutokola, a.s. (USA) / Production of car wheels and automobileparts / 410 Ostrava Water and Sewage, a.s. (France) / Productionand delivery of drinking water, removal and cleaning of wastewater / 382 Trefil a Schomberg, s.r.o. (Germany) / Plasticsproduction / 339
Hayes Lemmerz Alukola, s.r.o. (Italy) / Automobile partsmanufacturing / 310 Connex Morava a.s. (Czech Republic/France) /Road transportation / 212
Other Investment News
US based Roper Industries Inc. has decided to invest 24mil. CZK over the next five years into a new technology centrein Ostrava where it will create 18 highly qualified jobs.
"In Ostrava we will be focusing on projects for the developmentand innovation of our laboratory instruments. The Ostrava centrewill supplement the technology centres of our existingInstrumentation Segment operations located in the U.S., Denmark,Germany and France employing in total almost 1000 people,"commented Will Crocker, Roper's Vice President and GroupExecutive for the Instrumentation Segment. "The laboratoryinstruments produced from the design work there will serveforemost our materialography and physical property testingmarkets. The results from the product development in Ostravawill be utilized by our segment's production plants abroad wherethey will produce the final products."
The new customer support centre of GE Money Multiservisfor Czech and Slovak clients, a subsidiary of one of the largestand most renowned American companies will be located in Ostrava(Moravia-Silesia region) and will provide work for up to 500qualified staff members. The total investment exceeds threemillion euro.
"Our primary reason for opening the new centre is the growth ofGE Money in the Czech Republic," says Jiri Pathy, Chairman ofthe Board and General Director of GE Money Multiservis, thecompany in charge of developing the new centre within GE Moneygroup. "In order to maintain a high standard of services, wewill gradually increase the number of staff who are responsiblefor operating GE Money group and caring for its customers. Thenew customer service centre allows us to continue to fully meetour customers' needs," adds Jiri Pathy.
Taiwan-based ASUSTeK COMPUTER INC. is in the process ofconstructing a new plant and repair center in Ostrava.Investment into the facilities will reach 20 million EUR andeventually at least 1300 employees will work be employed. Thecentre should produce up to 200 thousand personal computers permonth and the capacity of the repair centre should reach 50thousand computers per month.
"The important factors in deciding on the location of thisplant were mainly the preparedness of the industrial park inOstrava-Hrabová and the proximity to the Technical University ofOstrava with which we intend to closely cooperate. We areinterested in their graduates and would like to take part increating specific study programs for their electricalengineering departments. We are already considering moving partof our technology-driven activities to the Czech Republic," saidGeorge Wu, Associate Vice President of ASUSTeK COMPUTER INC.
The best quality and most beneficial industrial zones in theCzech Republic were handed awards by the Czech ministers. Thefifth annual "Industrial Zone of the Year" awards werepresented according to the recommendations of the Ministry ofIndustry & Trade and CzechInvest in cooperation with theAssociation for Foreign Investment (AFI) and partners in the"Partnership to Support Foreign Direct Investment in the CzechRepublic".
The award for Industrial Zone with the Most Economic Benefitswas given to the "Cernovicka terasa" Industrial Zone in Brno,while the Zone with the Most Social Benefit in 2004 was theOstrava Hrabova Industrial Zone - 1st Stage. The Industrial Zonewith the Best Town Planning Solution is being prepared by aprivate developer in Ostrava -- CTPark Ostrava, and the"Brownfield of the Year" was won by the Skoda Plzen IndustrialZone.
American company CTS Corporation declared plans toinvest nearly 22 million dollars into a new facility in theOstrava region of the Czech Republic. CTS Corporation is aleading designer and producer of electronic components for theautomotive and electronics industry. Their main customers areSiemens, Magneti Marelli, Pierburg, Toyota, Renault and Nissan.
The new facility is expected to employ over 160 people withinthree years. Production in the new plant is targeted for asearly as June 2006.
"This investment in the Czech Republic will enable us to raiseour production capacity and better serve the European market,which at present is supplied mainly from our plant in GreatBritain," commented Ron Bell, Director of CTS's EuropeanAutomotive Operations, and added: "In the Ostrava facility wewill be producing electro - mechanical sub - systems and sensorsfor the auto industry."
Ostrava Property Figures
Apartment and Flat Rentals in CZK per month (2005 1st Q):(average range - exceptions can be found either way)
Size / CZK per month
1 + 1 (studio or bachelor) / 4 000 - 5 500
2 + 1 (1 bedroom) / 5 000 - 7 000 3 + 1 (2 bedroom) / 7 000 - 9000 4 + 1 (3 bedroom) / 8 000 - 11 000 House Sales in thousandsof CZK per flat (2005 1st Q): (average range - exceptions can befound either way)
Size / New Build (ave. 17 000 CZK/m2) / Heritage Building
1 + 1 (studio or bachelor) / 650 - 950 / 350 - 700 2 + 1 (1bedroom) / 800 - 1 200 / 500 - 800 3 + 1 (2 bedroom) / 1 300 - 2500 / 700 - 1 200 4 + 1 (3 bedroom) / 1 800 - 3 000 / 1 200 - 2100
Property Examples (common closing prices are commonly 5- 10% less than the asking price)
Property Description / Link
Studio (1 + 1) flat right in the center of Ostrava. 37 m2.Completely reconstructed. Floor 5 of 5 with an elevator. Askingprice: 395 000 CZK / Ostrava Property Example 1
2 bedroom (3 + 1) completely reconstructed. Floor 1/3. 76 m2.The price includes a garage. Asking price: 1 260 000 CZK / Ostrava Property Example 2
More examples added regularly...
As we've emphasized before, at Czech Point 101we are not going to over-inflate figures or try to sell you onhyped up facts. Our goal is to inform you to make the bestinvestment decisions possible.
Recommended Reference Websites
Ostravacity website Ostrava Airport Ostrava HrabováIndustrial Zone
The sources for this newsletter include the Ostrava city andCzechInvest.
About the author:Nathan Brown is the owner of Czech Point101, a business which helps buyers find their perfecthome in the Czech Republic and complete the purchase. Currentprojects in which Mr. Brown is directly involved includecommercial and residential property investments and a portfolioof individual and corporate business interests in Czech Republicand North America.
