I think it's fair to say that making predictions about the real estate market anywhere is about as easy as making long-term weather forecasts. It depends on many factors, by no means all of them relating to the country itself. And there is, of course, a strong human element.

Currently, the real estate market in the Czech Republic is still hot for a number of reasons. Other, more mature, markets in Europe are going through a period of stagnation. So investors in these countries, particularly institutional ones, are attracted by the comparatively high yields of the Czech market. Foreign investment funds, especially in Germany, are under severe pressure to expand their portfolios and increase returns for their investors.

As a result, demand for new projects in the Czech Republic currently far outstrips supply. By some industry estimates, a single disposal of reasonable size and quality can easily attract between 20 and 30 bidders. Prices are driven correspondingly high, as are the risks that purchasers are prepared to take. Stories of silly deals abound.

Obviously, this state of affairs cannot be sustained for very long — at least not in all areas of the market. So investors can expect some of the more ambitious prices to start falling. For all these reasons, caution is advised.

However, even when the current situation passes, I believe that the Czech Republic will continue to be a very good place for real estate investment in the long term. First, consider the things that have attracted investors to the country in the first place: Its geographical location in the very center of Europe ensures that strategic interest in the country will always be active. This, coupled with excellent infrastructure (especially compared to our eastern neighbors) and proven economic and political stability means that not only speculators, but also long-term investors from industry, retail, leisure and service sectors will continue to regard the Czech Republic as a safe place for their money. These factors can only improve, and with them the prospects of the real estate market.

The fact that the Czech Republic has officially been designated by the World Bank as a "developed" economy is clear evidence of this trend. It is also no accident that the Czech Republic is one of the most successful markets for inward investment in the world, far ahead of, for instance, China (on a per capita basis, of course).

The Czech Republic is a small country, and obviously this presents some limitations. However, a great deal of the potential outside Prague has yet to be realized — with the possible exception of specialty areas such as retail and industrial developments, where investment has been strong for a number of years now across the country.

I also mentioned the human element; this should not be underestimated. Real estate investors rely on gut feeling to a considerable degree, and when they come to Prague, they invariably have a good feeling about the city. I am not talking about the pretty architecture and good beer, but rather about an energetic and dynamic environment that is readily apparent to any visitor. This is an important factor for large institutional investors and small private investors alike.

Is it still a good time to invest? Unequivocally, yes. But my advice to any foreign investor new to the country is to be patient and prudent. In the long run, you will be rewarded.