Based on our preliminary calculations, the financial assets of private households in Germany are expected to have increased by 1.9 percent to EUR 6.2 trillion in 2018. Asset accumulation has slowed down significantly compared to 2017, where it was still growing at a rate of 5.4 percent. Growth was driven almost exclusively by the prudence of German citizens. Private households put away more for a rainy day in the first three quarters of last year than in the respective quarters of the previous year. The savings ratio for 2018 as a whole is likely to have risen by 0.3 percentage points to 10.2 percent. This marks the fifth consecutive year in which Germans are saving a growing proportion of their disposable income.
Nonetheless, we have been seeing a growing “investment backlog” as regards the formation of financial assets for several years now. German private investors tend to shy away from risk compared with their international peers. Only just over six percent of financial assets in Germany are invested directly in equities. In the environment of very low interest rates, private households are also reluctant to commit themselves long-term to fixed-interest forms of investment. Many private investors are at a loss as to where to park their new or freed up capital. This has led to a gigantic investment backlog that meanwhile accounts for more than a quarter of private financial assets overall.
The sharp rise in equity prices still made a noticeably positive contribution to the increase in private financial assets in 2017. This development then changed tack in the 2018 calendar year with the DAX, for example, losing around 18 percent in value. Other important equity indices also reported noticeable declines. Despite the low equity share, this resulted in valuation losses of around EUR 110bn in the financial assets held by German private households. A six-year development, which had generated gains year after year, has thus come to an end.
Interest rates also continue to make a negligible contribution to asset accumulation. At 0.44 percent, the average yield to maturity on fixed-income securities in 2018 hardly surpassed that of the previous year. The average return on savings deposits with up to three months’ notice fell to 0.16 percent last year. Only those investors holding older fixed-rate investments, bonds or life insurance policies are still benefiting from the higher rates of days gone by. Nonetheless, these investments are maturing gradually, so that the average notional return on interest-bearing financial assets after tax and administrative expenses has declined to 0.8 percent and was therefore once again unable to offset the slightly higher inflation rate of 1.9 percent. The real interest rate has therefore fallen from -0.8 percent in 2017 to -1.0 last year. This equates to a EUR 46bn loss of purchasing power of the financial assets. Assuming the equity markets can at least partially make up for the losses of the previous year, private financial assets are likely to grow at a faster pace again to EUR 6.5 trillion in 2019.