Report: German wealth shrank by 15% in decade

A new study shows that the value of private household assets has actually dropped over the past decade, contradicting prior reports.

Report: German wealth shrank by 15% in decade
A house for sale. A report shows that a slump in housing prices led to Germans' private assets dropping. Photo: DPA.

The report by the German Institute for Economic Research (DIW) released on Wednesday showed that the real net assets of private households in Germany shrank between 2003 and 2013.

Though private households’ net assets grew by an average of 0.4 percent, or €500, the report stated that when inflation was accounted for, households actually lost nearly 15 percent of their net assets, or about €20,000 on average.

Looking at a second dataset from between 2002 and 2012, the researchers also found a decline of 11 percent in real household assets.

Study co-author Christian Westermeier told The Local that a major reason for this could be the German housing market.

“In the 2000s, property prices were falling, especially in rural areas, and that is a big reason for overall asset decline,” Westermeier said.

Another reason is the way the Germans invest – or don’t invest. Germans are, famously, savers, and don’t always trust banks to hold onto their money, opting to invest in low-risk and therefore low-return areas, which often do not make up for inflation.

“Germans save a lot, but in the wrong way,” Westermeier explained. “They choose checking accounts, savings accounts, building loan contracts, but this isn’t paying much back.”

Westermeier also said that because “Germany is a country of renters” tenants see the lowest capital gains.

Only around 40 percent of Germans own their own home, despite a report last year that showed a third of renters could afford to buy.

Social mobility

The researchers said a key way to reduce the high level of wealth inequality in Germany would be to encourage more people to grow their own wealth.

The report stated that when looking at the time periods between 2002 and 2007, as well as between 2007 and 2012, 40 percent of respondents lost real assets.

Another 45 percent had tangibly increased their assets, while around 12 percent had stagnated.

People between 30 and 39 saw the largest increases, while those hitting retirement age spent more for health reasons, or perhaps wanted to pass inheritance on to relatives early.

Differing calculations

The study authors acknowledged that their conclusions differed from federal government numbers that have shown German households getting richer.

Westermeier explained that one reason could be that the datasets their study used did not include multimillionaires and billionaires.

“The super-rich can overshadow other data,” Westermeier said. “But the data collected in Germany is not very clear.”

But the main reason for the discrepancies could be the way that wealth is calculated, which the researchers said reflects how this kind of data needed to be improved.

Spokesperson from Berliner Sparkasse Constanze Stempel told The Local that the study did not mean people have changed their behaviours over the past decade and that the discrepancies between the DIW and federal reports are due to methodological differences and the calculation of real estate values.

If anything, Stempel said, Germans have been acting in their typical ways.

“This has nothing to do with German’s investment behaviour and their aversion to risky investments,” Stempel told The Local.

“They have not changed anything in the last ten years, on the contrary… Many saw their attitudes confirmed by the financial crisis and remained conservative in terms of investment, even with low interest rates.”

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REVEALED: The everyday products getting less expensive in Germany

Inflation rates are soaring in Germany - but the jump in prices hasn't affected all consumer goods. Here are a few of the thing that have actually become cheaper in recent months.

REVEALED: The everyday products getting less expensive in Germany

The cost of living is rising at an alarming pace. In April, the inflation rate in Germany hit a stunning 7.4 percent – the highest it’s been in more than 40 years.

In real terms, that means that many people will be getting poorer year by year, unless they’re lucky enough to have got a stellar pay rise at work. 

When you dig down into the nitty gritty of the price rises though, the cost hikes are quite unevenly spread across different goods and services. 

The Local has reported regularly on the dizzying rise in the cost of fuel and energy, as well as the food items – like milk and fresh meat – that are getting more expensive by the week.

READ ALSO: What to know about the latest price hikes in German supermarkets

In April, energy prices rose by 35.3 percent, while prices for heating oil almost doubled. Consumers also had to pay significantly more for fuel (38.5 per cent) and natural gas (47.5 per cent).

Meanwhile, the weekly grocery shop has also gone up in price, with food costs on average 8.6 percent more expensive than in April last year. Edible fats and oils (27.3 percent) and meat products (11.8 percent) were the items that went up most steeply. 

But not everything is going up in price so dramatically, and some everyday items have even got cheaper over the past few years.

Here’s what consumers in Germany are saving money on today compared to last year.

Digital services and software

Some of the biggest drops in prices over the past year have been in the online and digital sectors, which is great news for anyone looking to pick up a new entertainment system or a new Wifi contract for their home. 

According to the Federal Office of Statistics (Destasis), computer operating systems and other types of software saw the biggest drop in price between April 2021 and April 2022. In fact, people purchasing a software subscription or operating system this spring are likely to have paid around 14.3 percent less than customers who purchased the same software last year.

Destatis also noted that Wifi and internet services have become cheaper in recent months. Since April 2021, the cost of “wireless telecommunications services” (otherwise known as Wifi) has decreased by 2.4 percent, while “access to online services has internet” is 0.8 percent cheaper.

Anyone’s who’s been saving up for a new TV, DVD players or satellite dish will also be pleased to discover that these products currently cost around one percent less than they did in April last year. 

Other electronic devices such as headphones, headsets, e-book readers and digital picture frames fell in price by 1.3 percent between March 2021 and March 2022. Renting videos or DVDs became 0.8 per cent cheaper over the same period.


Wine and sweet treats

While it’s true that most of the weekly grocery shop has gone up in price, some surprising items are actually cheaper now than they were a year ago.

In fact, you can get a romantic dinner for two today for less than you could a year ago, since a plate of seafood is 1.6 percent cheaper and a bottle of wine is 0.8 percent cheaper. Home bakers can also enjoy things like puff pastry and baking mixes for less.

People with a sweet tooth seem to be the biggest winners this year: they can now enjoy a bar of chocolate for less, since the price of chocolate has dipped by three percent since last April, and also make savings of 2.3 percent on any artificial sweeteners they buy. 

Milk and white chocolate bars on display in Berlin.

Milk and white chocolate bars on display in Berlin. Photo: picture alliance/dpa/dpa-Zentralbild | Monika Skolimowska

The other treat that is getting cheaper is ice cream. Just in time for summer, the cost of your ice-cream sundae or Eiskugel in Waffel (ice cream in a cone) has dropped by one percent. 

OK, it may only be a few cents lower, but we still think it’s a good reason not to feel guilty about treating to yourself to an ice cream on a sunny day. 

READ ALSO: German consumers to be hit by further price hikes in supermarkets

Household appliances

Though many household expenses have gone up this year, a few common household goods are currently bucking the trend. 

For soup and smoothie addicts, a staple appliance has decreased in price over the past twelve months. In fact, buying an electric mixer, food processor or blender will set you back 2.8 percent less this year than in April 2021.

Prices for electric irons (-0.5 percent), hoovers (-0.8 percent) and “other large household appliances” (-1.2 percent), which includes water softeners, sewing machines and safes, have also gone down.

READ ALSO: The products getting more expensive and harder to find in Germany

Home and contents insurance

At a time when people have been spending more time at home due to Covid-19, the cost of home-related insurance has gone down.

According to Destasis, the price of “insurance services connected with the dwelling”, which means home and contents insurance, has gone down by around 1.8 percent year on year. 

Glasses and contact lenses

Glasses and contact lenses can be a big expense for anyone who needs them, so people with less-than-perfect eyesight will be pleased to know that the price of both of these has gone down slightly in the past year.

As of April 2022, the price of glasses and contact lenses has gone down by around 1.8 percent on average. 

Designers sunglasses at an auction house in Cologne

Designers sunglasses at an auction house in Cologne. Photo: picture alliance/dpa | Oliver Berg

Clothes and shoes have also been trending downwards over the course of this year: back in February, women’s clothes were around 3.3 percent cheaper than they were in February 2021, while men’s clothes had dropped 0.7 percent in price.

Meanwhile, shoes would have set you back around 0.7 percent less on average, with women’s shoes once again showing the steepest decrease at minus 2.9 percent.

Children were the only demographic to buck this trend. In fact, children’s clothes had gone up in price by 1.6 percent in February and children’s shoes were up by 1.4 percent. 

READ ALSO: OPINION: Why Germany’s energy relief payouts are no fix for inadequate social security