A small but ambitious realty company follows the market
An introduction by a friend, the support that followed and successful word-of-mouth led three friends to start Tide Reality in 1992. Originally limited to helping English teachers find flats, the company has grown and developed along with the Prague residential market.
“It was two and a half years after the revolution,” recalls Pavel Velebil, one of the partners and original founders of Tide Reality. “Many foreigners were coming to experience the city and teach. Most requests were for a flat close to the center for between $200 and $400 a month.”
A Canadian friend of Velebil’s introduced him to a Canadian couple who needed help finding a flat. They were so pleased with his assistance, they started recommending Velebil and his friends to other Canadians coming to Prague.
“It was quite a vibrant and interesting market in those days,” Velebil says. “There were no clear rules, so all negotiations between tenants and landlords took a long time.”
It was also a time when a lot of flats hadn’t been updated in decades, so a lot of improvements had to be done. Many landlords wouldn’t begin renovations until a contract had been signed, and sometimes not until they received the first month’s rent.
“Everyone had to learn,” says Velebil. “Tenants had higher expectations than what the market had to offer, and landlords had to learn that once you agreed to do something, you had to follow through.”
It was a wild ride for the first couple years. Then after 1995, Velebil says, laws governing such transactions were created and the market began to stabilize. Flash-forward ten more years, and the situation is quite different.
“Now our clients are mostly Czech and we handle more sales and investment transactions,” says Velebil.
Today, Tide Reality does more selling, especially of newly-built flats, than letting. Velebil says that’s not because of a drop in rental business, but because of the rapidly growing sales market.
“Three years ago, we probably did 50 percent sales and 50 percents rentals,” he says. “Now, it’s more like 70 percent sales and 30 percent rentals.”
Terms like “new construction” and “mortgages” are the new buzzwords, and Tide is going with the flow. “We are seeing a strong tendency to live in newly-built, quality housing,” Velebil says. “People are searching for a place to live that can meet their needs and wishes.”
Of course, that can mean different things to different people.
“Buyers’ and developers’ definition of quality differs,” Velebil acknowledges. “Buyers are searching for value for their money. Someone looking to buy a 1.5-2 million Kc flat has different desires than someone buying a flat for 10-12 million Kc”
Still, no matter where they fall on the economic scale, developers are adapting to the market.
“This is visible even in the low end of the market segment [30-35,000 Kc per square meter],” says Velebil. “Developers are active in this segment, and especially in the last 12-18 months, have improved their standards and specifications.”
Velebil doesn’t necessarily steer his clients to the biggest developers for the best deals, which he believes can often be found elsewhere. “Middle-size developers, because of their size, need to succeed in each project,” he explains. “If they don’t make a profit in one project, they may not be able to do the next one.”
And mid-size companies seem to work harder at reaching every buyer.
“They are searching for better locations and creating more attractive concepts architecturally, as well as adding extra amenities,” says Velebil. “This helps them compete with the larger players who are stronger financially.”
But as the Prague real estate market is maturing, so too are developers’ sales techniques. “One large developer conducted an intensive marketing campaign on their ‘luxury specifications,'” says Velebil. “They promoted themselves, made themselves visible in the marketplace and as a result are selling hundreds of units each year.”
Though the bulk of Tide’s clientele is now local, the company still handles transactions for foreigners, mainly those looking for investment properties.
“Property investors from abroad are searching for advice,” notes Velebil. “The main issue is what their invested money will achieve in terms of potential yield and future growth.”
Often, the investors are not individuals; they are companies, or groups of people who pool their money to buy investments abroad. Tide Reality sees two main groups: those who buy 10–12 flats in a new project, and those who buy existing properties, usually near the center, that are currently generating income and have the potential to grow.
“Because our base is residential, we have quality records on how the rental market has developed over the last 14 years,” Velebil says. “We can provide potential investors with information on what to buy, tell them if the price is competitive in the marketplace, and what potential yield they can expect.”
Velebil sees Tide Reality’s future growth coming in two areas: new sales and online.
“We own the domain names www.novebyty.cz and www.pragueproperty.com,” he says. “These will become our selling tools. People will find in one place an offer for new flats and single family homes, as well as advice on how to finance the purchase.”
Currently under construction, the Web sites will eventually show a selection of flats being built or recently completed, and connect potential clients with both a sales agent and mortgage broker. Over time, Velebil believes, Czechs will get in the investment property game as well.
“Czechs are property investors,” he believes. “Nearly everyone who is buying a flat looks at the purchase as the biggest and most important family investment.”
Certainly the market potential is there; barely two percent of Czechs have mortgages, compared to between 40 and 50 percent of people residing in West European countries. And Velebil feels his firm is poised to take advantage of its knowledge of both local and foreign clientele.
“Currently, Czechs make up 60 percent of our clientele, and foreigners 40 percent,” he says. “However, we have long experience in working with expats and foreigners, and we understand the expectations and needs of those clients.”
Of Tide Reality’s 10 employees, five are partners. Velebil says the company’s accomplishments and growth can be credited to a strong team effort by those people.
“The five partners who own and work for the company are the main reason for its long-term success,” Velebil believes. “When we meet to discuss new properties or business plans, the discussion comes from five independent, professional and passionate people.”