Swiss investors shun shares for property

Is this the best way to save your money? Keystone

Private households in Switzerland are turning away from stock market volatility and sinking a greater share of their savings into bricks and mortar.

A Zurich University study showed only 17 per cent of people surveyed invested in shares last year compared with nearly a third in 2000. But observers believe it is only a matter of time before changing economic conditions alter trends again.

The Swiss have traditionally favoured a healthy set of shares in their savings portfolio in addition to indirect ownership through pension funds. But they seem to be losing their appetite for holding shares.

“It is difficult to say whether people are being turned away from investing in shares or whether people who have recently come into money are not attracted to the stock market,” Urs Birchler, the lead author of the Zurich University study, told swissinfo.ch.

“A teacher who inherits his parents’ house may simply not be into the shareholding culture.”

Real estate winner

But it would come as no surprise that the bursting of the dot com bubble in the early 2000s and the recent financial crash has dented stock market confidence among small investors the world over.

“The results may also reflect the feelings of disappointed shareholders who feel that having had their fingers burned twice is quite enough,” said Birchler.

The most popular reasons for failing to invest in stocks were a lack of funds (37 per cent), a loss of risk appetite (28 per cent), not enough knowledge of the area (18 per cent) and not enough interest in the subject (18 per cent).

More of the survey’s respondents (56 per cent) were investing in private pension funds than the last time the survey was conducted in 2008 (53 per cent). But most of these people wanted their pension administrator to invest less of their contributions in shares.

The other big investment category winner was real estate, with 41.5 per cent of respondents sinking their savings into bricks and mortar in 2010 compared with 38.5 per cent two years previously.

The Swiss have traditionally shied away from buying their own homes, but the rate of owner occupiers has crept up to 40 per cent in recent years. Low interest rates, along with poor stock market returns and steady house price increases have pushed household investments in real estate from under SFr1 trillion in 2000 to SFr1.36 trillion in 2009.

Shares to rebound

“People still want to profit from low interest rates by further financing their homes,” Rolf Biland, chief investment officer for the Vermögen Zentrum (Wealth Management) chain of financial advisors, told swissinfo.ch.

“Real estate is a compelling investment because there are not a lot of other intelligent alternatives to the stock market right now.”

However, Biland is sensing that risk appetite is returning among the investors that come to him. He believes that it is only a matter of time before the trend in investments starts to change again.

“It is always a question of relative attractiveness,” he said. “People will soon start to see raising interest rates that will start doing damage to their bond portfolios. They will also hear more banks forecasting better times and will come to the consensus that stock markets are more attractive than other asset classes.”

The recent trend of moving away from shares towards safer investments has unsurprisingly been mirrored in most other parts of the world.

Faith in system

With an important and relatively stable financial system, coupled with unspectacular returns from real estate, Swiss households have never been shy about holding shares.

European Union statistics show the value of shares as a proportion of total Swiss household wealth stood at 27.5 per cent in 2000 and a quarter of all assets in 2007 – just under the average of EU zone countries.

So it would be premature to state that Switzerland’s respectable share ownership culture is in terminal decline. Swiss National Bank statistics show that combined personal wealth increased by 6.5 per cent in 2009 to SFr2.6 trillion – or SFr333,000 per household.

The total value of shares held by households declined to SFr169 billion in 2008, but recovered to SFr212 billion a year later.

And the Swiss appear not to have lost faith in their banking system following the financial crisis. More than 90 per cent of the survey respondents said the Swiss system was either safe or very safe.

Shareholder ownership study

The Zurich University study interviewed 2,000 Swiss investors between the ages of 18 and 74. It was the sixth such study since 2000.

The overall percentage of people directly investing in shares had sunk by one percentage point from the last survey in 2008 to 17% last year.

Respondents in the older age brackets proved to be most affected by the ravages of the recent stock market crashes.

Some 7% fewer investors aged between 50 and 59 put their money into shares, while 6% fewer 60-74-year-olds trusted stocks.

The younger generation, however, showed more appetite for shares than in the previous survey. Twice the number of 18-29-year-olds invested in shares in 2010 than two years before.

As in previous surveys, more investors from the German speaking region (20%) put their savings into shares than in the French speaking part (11%) or Italian speakers (9%).

There was less confidence in the big banks (Credit Suisse and UBS) in 2010 than in 2008 – the year the financial crisis took hold.

Only 31% of respondents bought shares from the big banks last year compared with 39% in 2008. However, that still meant that most people dealt with these banks than any other.

Raiffeisen Bank and the Post Office were the only banks to attract more custom from two years ago.

Investors perceived themselves to be better informed than two years ago, with only 10% saying they had no idea about investing (19% in 2008), 56% saying they had a basic grasp of the concept (51%) and 34% saying they were well clued up (30%).