At the end of the second quarter of 2018, the price of assets held by German households rose by 6.5% year-on-year. The price increase is driven by real assets such as real estate, while financial assets are falling.
Prices for business wealth are experiencing the highest growth rate of the quarter at 9.1%, while the highest rate of deflation (-3.0%) of all asset categories is recorded for collectors' and speculative items.
Households with a high level of real estate and business ownership are the main beneficiaries of the persistently high inflation. These are more common in wealthy or older households.
Asset price inflation for German households amounted to 6.8 % in comparison to the same quarter of the previous year. It is still on a high level but well below the record levels of the previous quarters and well above the long-term historical average (+3.3% p.a. since 2005). Inflation continues to be driven by the price development of real assets.
Within real assets, prices for real estate rose by 8.6% year-on-year. At +9.3 %, the price growth rate for business wealth is high, but significantly lower than in previous quarters. Durable consumer goods rose by 1.0 % in price, while collective and speculative goods fell by -3.0 %.
In comparison to the same quarter of the previous year, prices for financial assets fell by -0.4 %. Among financial assets, prices for other financial assets (measured by gold and commodity prices) decline most sharply (-8.4 %). Bonds are falling by -1.6% and prices for shares are roughly at the same level as in the same quarter of the previous year (-0.0%). By definition, savings and demand deposits are not subject to price changes.
In the cross-section of assets of German households, households with high business and real estate assets benefit most from rising prices. This is particularly the case among the wealthiest households and the upper middle class. By contrast, households with a relatively high share of savings and sight deposits in total assets, as is the case with lower middle-class households, have the lowest price growth rate of their assets.
The differences in asset price inflation in the age cross-section of German households remain unchanged. Pre-retirement households benefit the most from rising prices due to their proportionately high operating and real estate assets. Households with lower real estate and business property, as is the case with younger households, are left behind by the lower price growth rate.
Inflation as measured by consumer prices is 2.0% year-on-year at the end of the second quarter and is thus significantly lower than asset price inflation. The price increase of the producer price index is also well below the asset price index.