The number of over-indebted consumers in Munich who can no longer meet their payment obligations continued to decline last year, falling by around 1,700 to 90,362 people. The debtor ratio fell by 0.12 percentage points to 7.24 percent, the lowest level since data collection began in 2004. But Philipp Ganzmüller, managing director of Creditreform Munich, sees this as “only cause for celebration to a limited extent”. The decline has slowed down and in some areas the values are already rising again, which is why Ganzmüller sees the first signs of a trend reversal. The reason for the higher debt rate in some Munich districts could be “catch-up consumption” combined with greater financial burden due to higher credit and living costs.
“It looks sunnier than it is,” said Ganzmüller at the presentation of the “Munich Debtors’ Atlas 2023” in the press club. Although the debtor rate has fallen continuously since 2019 (8.96 percent) and the increase feared due to the consequences of the pandemic has not materialized, this is due to more cautious consumer behavior. “Many consumers had to limit their financial spending and acted more cautiously as a result.”
This also correlates with the growth forecasts for the economy. In addition, population growth has accelerated the decline in the debtor rate due to the influx of highly qualified specialists. And last but not least, the figures also reflect the fact that the storage period for the discharge of residual debt has been limited to just six months instead of the previous three years. Between 15 and 30 percent of the people who received a discharge of residual debt in the insolvency proceedings would become conspicuous again, explained Ganzmüller.
Many “failed self-employed people” reported
When looking at the 47 districts examined by Creditreform, an inconsistent picture emerges this time: in 13 districts the debtor rate increased, in 31 it decreased again, while three districts remained unchanged. The statisticians found the greatest decline, minus 0.69 percentage points, in the old town, which, on the other hand, still has the highest debtor rate (11.92 percent) in all of Munich. There were also slight declines for Schwanthalerhöhe (minus 0.52 percentage points), for Am Hart (minus 0.5), Aubing and Au (minus 0.39 each).
According to Ganzmüller, the fact that “many of those affected do not live here voluntarily” may play a role in the old town, given the comparatively small population. Ganzmüller described that a relatively large number of people are housed in homes, accommodations and guesthouses there, including many people affected by excessive indebtedness. In addition, many “failed self-employed people” were recently reported in the old town. In Munich in particular, this cause of over-indebtedness, as well as long-term low income, is now particularly important. The main causes are unemployment, illness, separation or divorce and inefficient household management.
The few districts in which the debtor rate rose were very heterogeneously distributed, said Ganzmüller. Ramersdorf, which was already at a high level, gained a little (0.25 percentage points) – but so did Bogenhausen, which was affected far below average (by 0.28). The district with the lowest rate of private consumers remains Obermenzing (3.95 percent), followed by Au and Solln.
Men are almost twice as likely to be over-indebted as women, which Ganzmüller attributes primarily to their greater willingness to take risks. Over-indebted women, on the other hand, are usually single parents who often also have to suffer from maintenance arrears. The Creditreform managing director sees a worrying effect in the fact that senior citizens in Munich are more likely to be in debt than nationwide.
Increased construction costs have an impact on rents
Overall, Ganzmüller gave a pessimistic outlook: “We will see increasing numbers of debtors again.” The construction costs, driven up by interest rates, would have an impact on rents, and he also sees many bankruptcies in the construction sector. Many companies are “currently suspending” and are laying off employees.
The debt advisors provided the city and associations with almost 20,000 consultations in 2023, around 1,000 more than in the previous year, explained Marc Wichlajew, head of the city’s debt advisory service. Low-income households, such as a family of five living in 43 square meters, as well as single parents and seniors, were primarily looking for help. Many people would suffer from wages not keeping up with inflation and would fear bills from energy suppliers that would threaten their existence.
In the representative survey conducted by the Social Department on the social situation in Munich in 2023, ten percent of households stated that they were unable to heat their apartment adequately. Wichlajew therefore advised those affected to take advantage of the comprehensive support offers for Munich citizens, such as the heating fund, in addition to government aid.