The savings book has taken care of. With low interest rates, sometimes even in negative territory, money can no longer be increased. Even banks have been paying on their deposits at the European Central Bank (ECB) since Years on it and get interest-free money in return. With an inflation rate of two percent in April 2021 compared to the previous year, money is losing additionally in value. So a huge bubble builds up here, which at some point pl atts? And what does that mean for buying real estate? & nbsp;
Inflation because of low interest rates?
For years, experts have been warning of the “risk of inflation”. The expansive monetary policy, low interest rates and the lush economic stimulus programs in the wake of the coronavirus pandemic give rise to fears of a glut of money that will drive prices up. The prices for residential properties (house price index) were given by the Federal Statistical Office for the fourth quarter of 2020 even with an increase of probably 8.1 percent compared to the previous year – the highest rate of increase since 2016. In metropolises the price increase was in some cases well over ten percent. But not everything points to inflation. In an interview with Flossbach von Storch , for example, Peter Bofinger appeased that the expansion of the M3 money supply in the euro area 2020 was still moderate at around ten percent: “2001 and 2007 have We have even seen double-digit values before without inflation. ”In the USA, this value is many times higher. Due to various factors -such as home office, less travel, digitization and low wage increases- he reckons with “more likely deflationary tendencies”. Other experts add that, for example, tax increases could reduce the amount of money in circulation. & nbsp;
Banks charge custody fees because of low interest rates
The current phase of low interest rates means that banks are also increasingly charging a so-called ” custody fee “. According to a study by Biallo.de that is around 410 out of 1,300 banks and savings banks in the In the private sector, even more so in the business sector. Most, however, offer a certain amount of allowance. In a contribution for the Capital-Magazin noted the Ifo economists Clemens Fuest and Timo Wollmershäuser that the “loose monetary policy” did not accelerate inflation and that there are reasons for the risks. Only in the event of an economic downturn would the ECB no longer have the opportunity to stimulate the economy by further cutting interest rates. That could lead to price bubbles in the financial markets. & nbsp;
With stocks, ETFs and funds against inflation
With stocks or funds you invest your money directly or indirectly in companies. A great advantage of acquiring company shares is that they are classified as real assets. The value of manufacturing equipment, machinery, company buildings, customer base, etc., evolves in line with inflation. With higher prices and rising dividends, shareholders also participate in rising inflation. We therefore recommend our clients a well-structured investment portfolio and, if necessary, an investment in real estate. Because stocks, funds and real estate are protected against inflation. & nbsp;
How construction financing is still worthwhile
A property purchase can be worthwhile despite -and precisely because of- the low interest rates: Low interest rates on construction financing well below the inflation rate at least partially offset the higher construction costs. As a long-term investment and especially for your own use, buying a house can also be worthwhile regardless of future developments. Nevertheless, a certain share capital must be available and long-term financial security must be guaranteed.
