Financial Assets of Austrian Households Decline for the First Time Since the Financial Crisis

People ♦ Published: October 31, 2022; 10:48 ♦ (Vindobona)

The economic crisis, high inflation, falling share prices and rising energy prices are now taking their toll. According to a new study, average household wealth in Austria fell in recent months for the first time since the 2008 financial crisis.

In particular, the unfavourable price developments of shares and investment certificates led to significant asset losses. / Picture: © Wikimedia Commons, Håkan Dahlström from Malmö, Sweden, CC BY 2.0

According to a new publication of the Austrian National Bank, the financial assets of Austrian households have decreased for the first time since the financial crisis in 2008. The reason is the continuing challenging economic situation.

This decline was measured among private households as well as non-profit private organisations such as trade unions, associations or aid organisations.

In particular, the unfavourable price developments of shares and investment certificates led to significant asset losses in the first half of 2022. Nevertheless, a considerable part of the financial resources continued to flow into these forms of investment, while deposits were only built up to a small extent.

This development hit particularly hard because many households have shifted their funds significantly in favour of shares and investment certificates since the beginning of the pandemic.

"The recovery of the global economy after the pandemic was abruptly interrupted by the effects of the war in Ukraine," Deputy Governor Gottfried Haber opened a press conference at the Oesterreichische Nationalbank (OeNB), which published the results. In 2021, a very high savings rate to the tune of 12% was still observed due to limited consumption possibilities.

"High energy prices, which are fuelling inflation, and the phasing out of the pandemic effects mean that a much lower savings rate is now to be expected than in the last two years," explained Deputy Governor Haber.

Austrian households invested EUR 24.2 billion in 2021, slightly less than the previous year's EUR 28.3 billion. In the first half of 2022, financial investments reached EUR 7.2 billion, roughly the same level as in the same period in 2019. At the end of the first half of 2022, the financial assets of the domestic household sector were EUR 799 billion, 3.4% lower than at the end of 2021.

"This decline, recorded for the first time since the financial crisis of 2008, is due in particular to price losses from shares and investment certificates," explained Johannes Turner, Director of the Statistics Department at the OeNB. Since the beginning of the pandemic, this form of investment has been in much greater demand than before.

Between 2020 and the first half of 2022, almost 40 % of the financial investments of the household sector flowed into shares and investment certificates, whereby these also initially brought in high price gains. However, volatile stock market developments in the first half of 2022 led to losses of EUR 18 billion.

Since the beginning of the pandemic, the structure of financial investments has also changed significantly: Since 2020, only every second euro flows into deposits, compared to 3 out of 4 between 2015 and 2019. Similar developments were also observed in numerous other euro area countries.

Austrian households continue to prefer overnight deposits at the expense of tied deposits. This also affects the long-term composition of financial assets, which is currently dominated by overnight deposits with a share of 27%. Before the financial crisis, this form of investment accounted for only 10 %. In the same period, the demand for tied deposits showed the opposite trend: they lost massively in weight and currently stand for 11 % of assets.

OeNB Austrian National Bank