As in similar earlier periods, higher external financing of private fixed asset investments was stimulated by declining interest rates and a government promotion policy which favoured borrowing. However, the peak is likely to have been passed in 1993-94. In the ensuing period, the shifts of emphasis in residential construction and the gradual reduction of tax privileges tended rather to support higher internal financing again.
By contrast, the decline in interest rates has not significantly increased the propensity to raise consumer borrowings; this is also supported by relevant studies.14 Implications for economic policy The long-term changes in asset formation and investor behaviour show not only that German households have a consistently strong preference for the acquisition of real estate, but also that they have become increasingly sensitive in their portfolio allocation.