Building Land and Start-Ups: the Clear Choice for Interesting Returns

Czech dollar millionaires expect the most interesting returns on their investments from building land and start-ups. Agricultural land has begun losing appeal, suffering a record drop, at least according to the results of the unique eighth annual survey of Czech and Slovak dollar millionaires: J&T BANKA Wealth Report 2018.

26 September 2018

Local high-net-worth individuals expect the best returns on their investment from building land (39%), start-ups (35%) and residential real estate (29%). The mainstays are foreign company stocks (20%), corporate bonds (16%), notes (11%) and investment funds (5%). For affluent Czechs, the appeal of Czech company stocks improved slightly. Collection activities saw the biggest jump in the Czech Republic, doubling year-on-year to 20%. In comparison, Slovak dollar millionaires trust building land to give them the best returns (35%), following by corporate bonds (32%) and foreign company stocks (31%). The mainstays for Slovak dollar millionaires include alternative investments (24%), notes (13 %) and other real estate (12%). Slovak start-ups saw the biggest shift in terms of being perceived as giving interesting returns, with the number of Slovak dollar millionaires preferring them as an investment growing to 25%, a year-on-year increase of 10%.

 

Residential real estate and the decline of agricultural land

Interest in residential real estate as an investment has weakened in the Czech Republic since last year, but 29% of dollar millionaires still expect residential property to give them interesting returns. Conversely, in Slovakia, residential real estate continues to grow in popularity, with 20% of Slovak dollar millionaires attributing to them the most interesting returns. The trust in residential real estate has also been supported by the general economic boom and strong demand for housing due to dynamically growing salaries and low interest rates. The long period of zero or negative interest rates has led investors to seek out real assets, such as real estate or various alternative investments, to store wealth.

The chapter on real estate can be closed with investments in other real estate, where 20% of Czech and 12% of Slovak millionaires expect interesting returns. Agricultural land saw the biggest year-on-year drop in expected returns, falling 10 percentage points to 18% in the Czech Republic and 2 percentage points to 19% in the Slovak Republic. This drop was caused not only by higher prices compared to the past, but also by the fact that a lot of agricultural land has already been bought up,  with those interested in this form of investment being left to “scrape the barrel” for small plots. Also contributing to this drop is the perception that large oligarchic groups active in agriculture are putting pressure on and influencing developments in this sector.

Start-ups are not just about supporting entrepreneurship

Of Czechs, 35% expect start-ups to give them interesting returns. This applies to 25% of Slovak dollar millionaires. They are aware of the risk of these investments and know that not every idea will be successful, but this form investment offers them much more than just an investment: here they can apply their experience and position, with many acting as “mentors” for start-ups. Perhaps even this dimension helped the year-on-year increase in expectations (+8 percentage points in the Czech Republic; +10 percentage points in the Slovak Republic).

Cryptocurrencies also offer technology

Ever more dollar millionaires are expecting interesting returns from cryptocurrencies. It may appear that the rise in interest in cryptocurrencies are their extensive media coverage, especially when it comes to bitcoin. Nevertheless, dollar millionaires are not easily swayed by the media and trends. Two percent of Czech and Slovak dollar millionaires saw cryptocurrencies as good investments as early as 2013. They have thus been involved in cryptocurrencies from the onset. Investors see not just cryptocurrencies but also the technology required for such currencies to exist as a good investment opportunity. Now 8% of Czech and 11% of Slovak dollar millionaires expect cryptocurrencies to give then an interesting return on their investment. Compared to the general population, Czech dollar millionaires are also much more careful about regulation and even about bans on digital currencies (24% of millionaires, 28% of the general population).

View from a wider perspective

A comparison of the last five years provides an interesting view of investment trends. Ever more Czech dollar millionaires believe that investment in building land (+ 11%), residential real estate  (+10 %) and other real estate (+13 %) is advantageous. While in 2014, 31% of wealthy Czech expected interesting returns on agricultural land, this year it is 13%  fewer and, unbelievably, 23% fewer than in 2016.

A similar trend can also be seen in Slovakia, where more dollar millionaires than the year before – specifically 17 percentage points more – believe that investment in building land is advantageous. Agricultural land, however, saw a drop in expectations by 19% compared to the maximum it enjoyed in 2014.

The above-mentioned investment dimension of entrepreneurship is apparent in the Czech Republic as well. In terms of being perceived an interesting investment opportunity, start-ups have seen an improvement among Czech dollar millionaires by 14 percentage points. This also applies to Czech company stocks, which grew in favour by 7 percentage points compared to 2014.

Who are dollar millionaires?

On average, Czech dollar millionaires are 53 years old; Slovaks are two years younger. Compared internationally, our dollar millionaires are still young. According to the Wealth X World Ultra Wealth Report 2018, the average age of world dollar millionaires is 61 years.

The world of Czech and Slovak dollar millionaires is a man’s world. In the Czech Republic, 95% of the wealthy are men; in Slovakia this figure is 91%. In the Czech Republic, only 5% of women are dollar millionaires; 9% in Slovakia. Even though globally most of the wealthy are men, the percentage in the Czech Republic and Slovakia is greater than elsewhere. Abroad, an estimated 13% of dollar millionaires are women.

The main source of income for Czech and Slovak millionaires continues to be business. It is therefore not surprising the most dollar millionaires hold the position of company owner or executive (51% in the Czech Republic; 55% in the Slovak Republic) or are self-employed (9% in the Czech Republic; 7% in the Slovak Republic). The growing age of dollar millionaires is also beginning to have a bearing on the positions they hold. A total of 14% of Czech and 7% of Slovak dollar millionaires are members of supervisory boards or boards of directors, which in many cases could relate to their handing over the management of their empires to their successors while retaining a controlling role. A total of 9% of Czech and 15% of Slovak dollar millionaires are retired; 12% of Czech dollar millionaires are employed in management positions (4% in the Slovak Republic) and 2% as specialists (7% in the Slovak Republic).