Germany has a high degree of financial security, and the fact is reflected in the sentiment of the German population. According to the annual Wealth Barometer published by the German Association of Savings Banks and Girobanks (DSGV), 52 percent of the respondents considered their financial situation as sound or indeed very sound. However, the degree of contentment, while high, has declined in recent years. The share of respondents who are content with their lot slipped from 58 percent in 2014 to 56 percent a year later. Then again, the number of those rating their financial circumstances as dire has dropped as well, and is now down to 8 percent. None of this has done much to change prevailing consumption patterns, despite the low level of interest. Three out of four consumers spend just as much as they did the previous year, whereas the majority of the remaining 25 percent who did change their consumption pattern actually cut down on their spending or intend to do so. The share of those who spend more dropped to an all-time low of five percent.
The Effects of the Low Interest Cycle
For obvious reasons, the issue of low interest rates figures prominently in the field of financial investments. Many Germans are rather worried about their savings. In fact, 58 percent of respondents identified the ECB's monetary policy and the resulting low interest rates as their greatest concern in regard to capital-building. In the absence of alternatives, Germans have turned to real estate investments lately, because they consider them a very safe investment. The fact that by the end of the first three quarters of 2016 the number of approved planning permits reached a level not seen since 1999 suggests as much.
Security the Chief Priority
The shifted parameters have deepened the desire for safety. While safety has traditionally been important to German savers, its significance climbed to a record high this year, as 57 percent labelled it the key aspect in their choice of investment, ahead of flexibility and availability. Earning a high rate of return lost in significance, slipping by five percentage points in the number of responses and dropping to fifth place, and this is certainly attributable to the zero-interest policy. Buying property for owner-occupancy has moved high up on the list, with 59 percent of respondents deeming it the best way to build capital, ahead of buy-to-let investments (29 percent) and building society savings accounts (27 percent). Stocks and investment funds were considered suitable options by a minority only (twelve and ten percent, respectively). In short, financial investments remain a rather conservative affair in Germany, with savers willing to accept lower rates of return in exchange for more security. Since the ECB's monetary policy is unlikely to change any time soon, real estate is bound to remain a safe and sound investment for the foreseeable future.