Global wealth privatization mounts: Germany trails behind other nations
Boost in Global Private Wealth, Yet Germany Struggles
The boom in global private wealth saw a significant surge in 2024, reaching approximately $470 trillion, as per the latest report from UBS. However, Germany struggled to keep pace with regions like North America, where wealth increased by an impressive 11%.
Europe, the Middle East, and Africa registered a modest 0.4% growth, paling in comparison to North America's significant spike. The "Global Wealth Report" revealed that over half of the 56 markets analyzed witnessed a decline in the value of financial assets and real estate.
Switzerland Tops the Wealth Ranking
Switzerland once again held the top spot in the wealth ranking. Residents of this country have traditionally viewed wealth as a haven of safety. In 2024, an average adult in Switzerland possessed wealth of over $687,000. The USA followed closely with wealth per adult at $620,654, while Hong Kong trailed behind with roughly $601,000.
As the world's third-largest economy, Germany ranked a modest 19th, with wealth per adult amounting to around $257,000. This figure falls significantly below that of the UK and France.
Modest Growth for German Wealth
German private wealth observed a moderate increase in 2024, according to UBS. When adjusted for inflation, the average wealth in euros rose by less than 2.5% from the previous year. The bank attributes this to the fact that less than half of Germany's total private wealth is comprised of financial assets.
As a result, Germans reaped fewer benefits from robust stock markets. More than two-thirds of wealth came from non-financial sectors, such as land and real estate.
Germans tend to favor low-risk investment options like bank deposits and shun the stock market. By the end of 2024, private households' money assets reached a record high of around €9,050 billion. However, over a third of this was in cash and sight deposits, most notably among households with lower budgets.
In the forecast for the next five years, UBS predicts that worldwide wealth per adult will continue to grow. The US is expected to witness the fastest growth, followed by China.
However, Germany's weak performance in wealth growth compared to North America can be attributed to several factors, including:
- Slower property price appreciation: Wealth growth in Germany, particularly in the real estate sector, has been less dynamic compared to regions like Switzerland or North America.
- Market-driven wealth gains: The US enjoyed more extensive financial market gains, underpinned by a stable US dollar and buoyant markets.
- Currency factors: The US dollar's stability worked to its advantage, while Germany didn't experience the same level of market-driven gains.
- Structural economic characteristics: Germany's wealth accumulation is influenced by conservative investment behaviors, a higher rate of savings in non-financial assets, and exposure to sectors that drive wealth creation in North America.
In conclusion, Germany's lag in private wealth growth compared to North America is primarily due to slower property price appreciation, less market-driven wealth gains, currency stability favoring the US dollar, and structural economic features that limit rapid wealth accumulation, similar to the US markets.
- To mitigate slower growth in private wealth, Germans might consider diversifying their investment portfolio towards financial assets, such as stocks, bonds, and mutual funds, to potentially benefit from market-driven wealth gains like those seen in North America.
- Given the significant increase in global private wealth, individuals seeking wealth management, personal finance, and investing advice would benefit from understanding the factors driving wealth growth in regions like North America, and how to adapt their strategies for wealth accumulation in accordance with their own economic landscape, such as Germany.
