Few cities changed as fast as Prague did after 1989. Within a couple of years, a capital that had spent four decades under a communist government became one of the most talked-about places in Europe for young Westerners, investors and builders.
Martin Sumichrast was one of the people who went. In the early 1990s he pioneered Eastern European real estate development in Prague, financing ventures in Czechoslovakia that included a U.S.-style home development in the city. This post looks at what Prague in the early 1990s was like, and why the period drew so many outsiders.
Prague After the Velvet Revolution
The Velvet Revolution of November 1989 ended communist rule in Czechoslovakia with almost no violence. The country then had to build a market economy and a legal system to support it, nearly from scratch.
That process was uneven. Old rules stopped applying before new ones were fully written. Gabe Toth, who ran Westinghouse's operations in the country at the time, told Radio Prague in 1991 that it was hard for a business to know where it stood, because the old system had collapsed and the new one was still undefined.
Visitors noticed the gap between the city's beauty and its condition. Historic buildings were striking but often worn down. Simple services could be hard to find. Getting a lock fixed, for example, depended on knowing the right person.
Czechoslovak Privatization in the Early 1990s
The economic transition ran on three main tracks, each of which shaped how property changed hands.
- Restitution. Act No. 403/1990 let citizens reclaim property that had been nationalized without compensation. Act 87/1991 widened the scope to larger property taken between 1948 and 1952. Estimates put the value of restituted assets at US$2.5 billion to $4.2 billion by the end of 1992.
- Small privatization. A law passed in November 1990 allowed shops, restaurants, hotels and local service businesses to be sold at public auction. Auctions began in February 1991 and finished in the first half of 1993. By the end of 1993, more than 22,000 businesses worth over US$1 billion had been sold.
- Large privatization. Starting in 1991, big state enterprises were turned into joint-stock companies. Many of their shares were distributed through voucher privatization, in which citizens received vouchers they could trade for shares, often through investment funds.
The shift was quick. Between 1991 and 1992, the private sector's share of Czech GDP grew from 10.6 percent to 19.5 percent. On January 1, 1993, Czechoslovakia split peacefully into the Czech Republic and Slovakia, with Prague as the Czech capital.
Prague Real Estate After the Velvet Revolution
For property, restitution mattered most. Buildings returned to families who had owned them before nationalization, and many of those new owners had neither the money nor the experience to restore them. That created openings for outside capital.
It was not an easy market. British developer Nicholas Kirke, who set up a real estate company in Prague almost immediately after the revolution, described the situation in a 1991 interview. Property looked expensive compared with its poor condition. Many buildings were fully occupied by tenants who could only pay rent in Czech crowns, which made them hard to move.
Kirke also predicted that Prague would become a center of a growing Europe. Radio Prague later noted that he had correctly foreseen the property boom that followed. By the mid-1990s, the market had shifted enough that a 1994 survey by Price Waterhouse and King & Co., reported by The Prague Post, forecast an oversupply of quality office space in central Prague for 1995 and 1996.
Prague in the Early 1990s for Western Entrepreneurs
The newcomers ranged from large companies to recent graduates with a single idea. Westinghouse was one of the early American arrivals. So was Michelle Vincent of New York, who first visited as a tourist in June 1990 and went on to start a travel agency that placed Western visitors in private apartments. Her advice to newcomers was to expect about a year of hardship and to build trust with reliable Czech partners.
Estimates from the time put the number of foreigners who arrived between 1991 and about 1996 at 30,000 to 50,000, many of them English speakers from the United States, Britain and Canada. On October 1, 1991, The Prague Post published its first issue. Its editor, Alan Levy, called the city "the Left Bank of the '90s," comparing it to Paris in the 1920s. The phrase stuck.
The atmosphere was loose. Bureaucracies were stretched thin, and many businesses opened without permits. Most Czechs, especially younger ones, welcomed the arrivals. Bars, bookstores and cafes run by expats opened in 1992, and by 1993 publications such as Smithsonian and The New York Times Magazine were writing about the scene.
Martin Sumichrast and Prague Real Estate Development
Martin Sumichrast arrived in this environment with a family connection to the region. He was born and raised in Washington, D.C., the youngest son of Eastern European immigrants. His father, the economist Michael Sumichrast, was a native of Czechoslovakia who had left after the communist takeover and later spent two decades as chief economist of the National Association of Home Builders.
In the early 1990s, Martin helped pioneer Eastern European real estate development in Prague, including a U.S.-style home development. It was work that called for patience with an unfinished legal system and a property market still sorting out who owned what.
Today, Prague is one of Europe's most visited capitals. The city that Westerners found in 1990 and 1991, with its worn facades, crown-only rents and handwritten rules, is hard to picture now. For the people who built there early, it was a rare chance to take part in a city's second start.
More From Martin Sumichrast
Read more about Martin's background on the About page, or browse more places and trips in Travel. His writing, including two books co-authored with his father, is collected on the Books page, and the causes he supports are on Giving Back.