Building plots, start-ups, residential real estate and stocks. These are hot investment bets of Czech and Slovak dollar millionaires, ie people with disposable assets exceeding 22 million crowns. In view of rising inflation, the super-rich are advising to include more flexible assets in their portfolios that can better withstand impairment, according to Wealth Report 2021, backed by J&T Banka. By contrast, formerly traditional gold is now a wealthy investment flop.
Czech and Slovak dollar millionaires expect the highest appreciation from real estate, despite it, or precisely because of their rising price. At the same time, they believe most in investments in building land, which 49 percent of the Czechs and 42 percent of the Slovaks identified as top investments.
There are several reasons for the current market. The main thing is that building land can withstand inflationary pressures as a real asset.
The average Prague apartment has risen in price by two annual wages, 16 of which are now needed
Over the last five years, the prices of Prague flats have risen by 90 percent, but wages have risen by only 33 percent. The index compiled by the developer Central Group showed that the new apartment in the metropolis with an area of 70 square meters already costs 16 years of average gross wages of Praguers. Compared to last year, it is two annual salaries more. The index calculates the average gross monthly wage in the metropolis of 50,556 crowns and the price of a new apartment with the stated area of 9,626,234 crowns.
“The still high demand for residential real estate also plays an important role, which is reflected in their rising price. And the building plot is the first step towards the construction of a residential property, ”explains Petr Sklenář, Chief Economist of J&T Banka. “Last but not least, construction projects that have been suspended due to supply chain interruptions are finally expected to start. By the way, building land is one of the assets that has maintained the expectations of one of the most interesting appreciation for dollar millionaires over the last ten years, “he adds.
The real estate bubble just won’t burst
Dollar millionaires also trust to a large extent residential real estate, from which 31 percent of Czech and 36 percent of Slovak dollar millionaires expect the most interesting appreciation. While in 2020 investors were discouraged from buying too sharply by rising prices and the risk of rent shortfalls, which may reduce the return on investment (they appeared in 25 percent of responses), this year respondents believe in residential real estate, even though their prices have risen even more sharply year on year.
How to mature for inflation? Real estate funds can do it. But not all of them
Where to invest money so that it does not lose value when inflation is approaching six percent? And according to economists, it will go up to seven percent, maybe even higher. Many people who have savings address this issue. Real estate funds can do it. But beware, not all. You always have to choose.
“It also seems to be the dollar millionaires in the foreseeable future don’t be afraid of bursting real estate bubbles. Interest in residential real estate is still high, as there is still little construction in both the Czech Republic and Slovakia due to complex construction legislation. It was also supported by the lockdown, when the demand for recreational facilities increased significantly, “said Sklenář.
Developers are also talking about the persisting real estate bubble. “Prices are rising steadily, mainly due to a high excess of demand over supply, a complicated permitting process and rising prices and a shortage of building materials and manpower,” said JRD owner and founder Jan Řežáb.
“With a supply of thousands of new flats in the capital per year, it is logical that the problem causing astronomical prices is not on the high demand side of investment flats, but on the overall small supply of flats,” the strategy director added. UDI Group Marcela Fialková.
Apartments in Bratislava are a third cheaper than in Prague
The young Vít Soural, the son of billionaire and developer Marcel, entered Slovakia this autumn with his start-up Flat Zone, which compares and analyzes housing prices. Now it brings the first data from the Slovak market.
Even a bet on agricultural land pays off
Approximately one-fifth of the Czech and Slovak rich have been farming the agricultural land for several years. At the same time, even in 2016, agricultural land was a clear investment number one among Czech millionaires. More than two-fifths of respondents promised her the greatest return. It was not so much about the income from the lease, ie the lease of land to farmers. Rather, prices were generally expected to rise.
However, the rich also see the return on investments in companies, whether in the form of shares of foreign companies, private equity investments or start-ups. In particular, start-ups in recent years have proven to be viable, and last year brought a number of projects that are understandable to investors, as they provide new technologies for e-health, e-commerce or corporate systems.
Especially around start-ups operating in the field of digital healthcare, it is busy this year. For example, this spring, the Kasulka brothers launched the Pilulka Lab project in cooperation with StartupYard. It is going to invest up to one million euros in individual startups, focusing on the digitization of healthcare and adjacent areas.
Sotio received seven billion from PPF. They will go on to develop cancer treatment
Sotio Biotech received 280 million euros (7.1 billion crowns) from the PPF Group for the further development of new methods of cancer treatment. It will involve the expansion and development of the product portfolio, including the main product developed, SOT101, the launch of four new clinical trials and further development by the end of 2023.
Billionaires from bpd partners were again attracted by Slovak telemedicine project S-Case and we must not forget the generous support of PPF, which invested 280 million euros (7.1 billion crowns) in the biotechnology company Sotio for the further development of new methods of cancer treatment.
“Investing in start-ups can also be a source of innovation and technological innovation in-house, as the investor gets someone with ideas who are able to expand their business. While previously there was only the possibility of direct investment in a selected startup, today there are various venture capital funds and platforms, through which you can not only invest, but also directly meet start-ups. These innovations also contributed to the increased interest in startups, “explains Alena Tkáčová, Sales Director of J&T Bank.
Not just gas and oil. It makes everything more expensive, except for gold
Energy commodities are going up by tens of percent, which will lead to further increases in the price of goods and services. But the prices of other commodities are also going up. On the contrary, they lose precious metals and soy products significantly.
Loser of the year? Gold
Gold has lost its luster in the eyes of dollar millionaires. While in 2020 approximately one-fifth of dollar millionaires trusted him (20 percent in the Czech Republic, 23 percent in the Slovak Republic), this year it was only eight percent in both countries. The reason is the falling price of this precious metal, which has only fallen by 8% year-on-year this year, and the loss of the gold hallmark as a store of value in an environment of rising inflation.
This year, investing in gold not only did not cover inflation, but also brought a nominal loss. Its position was taken over in the cryptocurrency and bitcoin surveys, which rose from six percent last year to 16 percent this year, as well as more classic investments in stocks and private equity.
Gold is coming back underground. Czechs buy bricks and bury them in the garden
Fear of inflation, uncertainties associated with the pandemic and growing mistrust in the ability of politicians and economists are driving Czechs to feverishly buy gold bars. At the same time, they are slowly coming. Is it worth buying gold now?
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