Private individuals in Germany More and more people are living on capital alone – how does this work??
Zero interest rates and inflation mean that the savings of Germans are steadily decreasing. Nevertheless, the number of private savers has almost doubled. How can it be? A look behind the numbers, with the support of the Federal Statistical Office.
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Every few months, new projections reach the public with shocking figures about how much money Germans have lost so far due to low interest rates. According to the study, German savers lose between 30 and 54 billion euros a year. Between 2000 and 2019, according to DZ Bank, a loss of almost 650 billion euros has been accumulated.
Those who have money can no longer simply make it work for them, so it seems. On the contrary, money is evaporating all by itself due to zero interest rates and inflation.
Data from the Federal Statistical Office (Destatis) from the microcensus, which shows the number of private individuals in Germany, seems all the more astonishing. Private individuals are all those whose main income consists of capital income. The official statistics registers for this persons, whose predominant subsistence from own fortune, letting, old age part or even interest exists. The number of these privateers has almost doubled since 2000.
Regionally, most of the nearly 630 living nationwide.000 privateers where the greatest economic power is located, i.e. in Bavaria, Baden-Wurttemberg and North Rhine-Westphalia. A comparatively large number of private individuals also live in Schleswig-Holstein, which is economically weak but valued as a retirement home. Recently, there have also been private individuals in the new federal states – in 2000, their number was still so small in the Flachenlander that the Federal Statistical Office did not report them.
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Obviously, senior citizens in particular succeed in living as private individuals: almost two percent of all men over 65 live solely on capital. At the same time, the number of male and female senior citizens is converging, mainly because many female senior citizens benefit from inheritances. Overall, the number of private individuals in Germany has risen to almost one percent of the population.
But how can this be? How do these nearly 630.000 people to defy zero interest rates so successfully?
The most obvious reason is that a deep divide runs through German society when it comes to investing money: People with low and medium incomes rely primarily on traditional checking and savings accounts. These are precisely the investments on which savings are devalued by inflation and zero interest rates.
Investment Germans save more than before – because they get it wrong
Wealthy Germans, on the other hand, generally use checking accounts for their day-to-day financial transactions. However, their savings are stored elsewhere – where they yield a return.
On the one hand, this means on the stock market, in the form of shares or funds, but also bonds, for example from the better interest-bearing U.S. market. On the other hand, wealthy Germans rely mainly on real estate.
The issue of real estate – in a sense the second major rift through the local wealth landscape – is much more polarizing in Germany than in other countries. In no other European country are there so few real estate owners as here. At the same time, according to this year’s Global Wealth Report by the major bank Credit Suisse, almost 60 percent of German assets are in tangible assets, including above all real estate. The top one percent of Germans, in turn, holds 30 percent of all assets, according to the same report.
Methodology: Explanation of terms
The population of primary and secondary residents, formerly also referred to as the resident population, includes all persons residing in the municipality, regardless of whether they own another dwelling or accommodation and from where they go to work or education, or where they mainly stay (multiple counts). Furthermore, it is irrelevant whether a person lives in a private household or is counted as part of the population in shared accommodation, i.e. lives there and does not run his or her own household. The population of primary and secondary residence includes all registered foreigners (including stateless persons).
Depicted in the analysis is the population at the primary residence in private households. The population at secondary residences and in shared accommodations is not counted.
The predominant livelihood characterizes the source of subsistence from which funds for living expenses are mainly drawn. If there are several sources of income, the main one is taken into account. In the microcensus, the following sources of predominant livelihood are currently (2018) surveyed: "Own gainful employment/professional activity," "Unemployment benefit I (ALG I)," "Hartz IV benefits (ALG II, Sozialgeld)," "Social assistance (not Hartz IV), z. B. Basic income support in old age and in the event of reduced earning capacity, integration assistance, assistance for nursing care, assistance for subsistence," "pension, retirement pension," "own assets, savings, interest, renting, leasing, retirement property, life insurance, pension fund," "parental allowance," "parental income, including income from spouse or other relatives," and "other support, e.g., pension, pension, pension, pension, pension, pension, pension". B. BAfoG, early retirement money, scholarship, care insurance, asylum seeker benefits, care money for foster children or parents, sick pay, loans under the Care Time or Family Care Time Act".
Source: Federal Statistical Office
All this indicates that the biggest secret of success of German privateers is their real estate ownership. After all, rental and leasing income also provide a regular income, and this quite independently of the zero interest rates of the banks.
But not completely independently: After all, it is the interest rates that drive up real estate and land prices. Who has assets in the form of real estate, therefore, even benefits from the zero interest rates.
In addition, in Germany there is more and more inheritance, especially in the wealthy households. It can therefore be assumed that the number of private buyers will continue to rise in the future, despite or even because the low interest rates are likely to persist.