With interest rates at record lows, the 36-year-old took out two
loans and bought a three-bedroom flat in a leafy Berlin suburb for
"I don't think it's ever been as cheap as it is now," the IT
specialist said. He is paying interest rates of just 2.15 and 2.40
percent on five- and 10-year loans totaling 130,000 euros ($178,300).
Sebastian, who asked that his last name not be used, is one of a
growing number of Germans who are suppressing their inclination to
save and, instead, shelling out — on everything from property to
home renovations and holidays.
Last year, with unions securing strong wage hikes, employment at
record levels and interest rates on bank deposits delivering
next-to-no return, private households in Europe's largest economy
saved a smaller proportion of their income than at any time since
The latest statistics from Eurostat, the European Union's statistics
agency, show German households still save a higher proportion of
their earnings than nearly all of their European counterparts.
But the gap has narrowed. The savings ratio in Germany, currently at
10 percent, has fallen since 2008. In some other European countries
like Luxembourg and the United Kingdom households were putting aside
more of their income in 2012 than in 2008.
According to the GfK market research group, the propensity to save
in Germany is at its lowest level since reunification in 1990.
That's good news for struggling euro zone partners who are hoping to
sell more goods to the currency bloc's biggest economy. It's also a
welcome development for Germany, which may not be able to rely on
booming exports for growth as it has in past years.
"It's largely because interest rates are at a historically low level
and that means you hardly get any interest on classic investments
anymore," said GfK economist Rolf Buerkl. "So in real terms, and
taking the inflation rate into account, people's savings are being
A recent survey by Ipsos for ING DiBa showed that two-thirds of
Germans consider the interest on bank deposits to be so low that it
is no longer worth saving.
This has sparked fierce debate in a country where "Sparsamkeit", or
thriftiness, is next to godliness, and the national psyche remains
scarred by the experience of hyperinflation in the 1920s which wiped
At the height of the euro zone debt crisis, Chancellor Angela Merkel
held up the notoriously money-tight "Swabian housewife" from
southwest Germany — as a model for all of Europe.
But with the European Central Bank's (ECB) benchmark interest rate
down at a record low of 0.25 percent — down from 4.25 percent in
2008 — and inflation hovering around 1.5 percent in Germany,
squirreling away money in the bank makes little sense anymore.
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Jens Weidmann, president of the highly cautious Bundesbank, has said
he understands Germans' annoyance at their savings losing value but
added: "Please consider also that low interest rates are intended to
give a boost to consumption and investment."
That seems to be working in Germany, even if Christian Schulz of
Berenberg Bank says the country is unlikely to see Anglo-Saxon style
growth in consumption.
Disposable income of German households rose by 2.1 percent last
year. Consumption spending rose by an even stronger 2.5 percent.
Morale among consumers is at its highest level in 6-1/2 years, the
latest GfK survey shows. Germans are more willing to buy than at any
point in the last seven years and their income expectations have
risen to a 13-year high.
Retail sales are benefitting, though they are growing less quickly
than in previous years. In 2013 retail sales rose by a nominal 1.4
percent as Germans spent more on food, clothing and pharmaceutical
goods, compared with 2.0 percent growth in 2012.
Germans spent 8 percent more on holidays and private trips last
year, according to GfK. They are expected to shell out even more on
vacations this year. A survey by the FUR holiday and travel research
association showed one in four Germans want to travel more this year
and almost a third want to spend more money on holidays.
Germans are also investing in property and home renovation. While
hard data on the number of people buying homes is hard to come by,
anecdotal evidence suggests it is rising in a country where home
ownership rates have long been among the lowest in Europe.
Home approvals are climbing, with the latest figures showing German
home permits hit their highest level in nine years during the first
nine months of 2013.
Interhyp, Germany's largest residential mortgage broker, told
Reuters it saw double-digit growth in new business last year and
inquiries via its website are at a record high.
And a survey by German savings banks last year showed that one in
two Germans now see investing in property as the best way to secure
their financial future.
"Private people are investing more in real estate. They're taking
advantage of the period of low interest rates which is making taking
on more debt worthwhile," said Ralph Henger, a senior economist
specializing in real estate at the Cologne Institute for Economic
( $1 = 0.7293 euros)
(Editing by Noah Barkin and Jeremy Gaunt)
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