People in Germany are getting richer and richer – but the unequal distribution of wealth remains as great as ever. Real estate ownership plays a role in this.
Those who own an apartment here tend to have no financial worries: old buildings in Berlin Photo: dpa
Real estate makes the difference: People in Germany have accumulated more wealth in recent years. However, it is still very unevenly distributed in an international comparison.
The richest 10 percent own more than half of the total wealth (56 percent), according to a study by the German Institute for Economic Research (DIW), which is available to the Deutsche Presse-Agentur. The poorer half, on the other hand, has a share of only 1.3 percent. Real estate ownership also plays a role here.
"Although wealth inequality is very high in Germany – also in an international comparison – it has remained at this level for the past ten years," explained study author Markus Grabka. Thanks to low unemployment and rising wages, many people have been able to save more in recent years. According to the study, net wealth per capita rose by an average of 22 percent from 2012 to 2017 to just under 103,000 euros.
The median value, which separates the richest 50 percent from the bottom half, is only 26,000 euros, well below the average value. This points to a highly unequal distribution of wealth, he said. "People who were born between 19, live in West Germany and own real estate have particularly high levels of wealth on average," says study co-author Christoph Halbmeier, summarizing the findings.
Big differences between east and west
In 2017, the population aged 17 and over in western Germany had an average net wealth of 121,500 euros, while in the east it was just 55,000 euros. One reason for the difference: More people in the eastern states live in rented accommodation than in the west.
People who live in their own apartments or houses have benefited from the real estate boom in recent years – their assets have grown particularly strongly. According to the survey, owners of owner-occupied property had assets of around 225,000 euros on average, while tenants only had 24,000 euros. Business assets – i.e. ownership of a company or a stake in one – have also grown significantly since 2012. However, according to the data, this is mainly in the hands of the wealthier.
A recent study by the Bundesbank also concluded that the net assets of property owners in particular had increased as a result of the rise in property prices. However, only 44 percent of private households in Germany own their own homes. This means that many people are missing out on the real estate boom. In other euro countries, such as Italy and Spain, the proportion of property owners is significantly higher, at around percent respectively.
The study author has controversial proposals for solutions
So how can the gap be closed? "A wealth tax, as has recently been called for once again, will create additional fiscal revenue, but this will not automatically benefit the low wealth groups of the population," argues study author Grabka.
Instead, the lower- and middle-income population in particular should be offered better opportunities to accumulate assets. Private real estate ownership should be promoted more efficiently. Private pension provision should be based more on models such as those in Sweden. These achieved far higher returns than the Riester and Rurup pensions subsidized in Germany.
The study is based on the results of a survey of around 30,000 people in around 15,000 households. The survey covers the assets of people aged 17 and over. This includes owner-occupied and other real estate, savings, shares and investment units, entitlements under life and private pension insurance policies, business assets and valuable collections such as gold, jewelry, coins or works of art.