The net worth of the average Canadian household fell for the first time in a decade as growing debts, shrinking pensions and declining liquid assets took their toll, according to a new report by Environics Analytics.
The average Canadian net worth dropped by $7,594 or 1.1 per cent to $678,792 last year as increases in the housing market were more than offset by the late 2018 stock market correction, higher debt levels and a downward tick in pension plan values, Toronto-based Environics reported.
The average home gained $6,336 in equity or 1.6 per cent while the stock market downturn erased an average $10,045 and debt levels increased by an average of $3,309 or 2.3 per cent, the marketing and analysis company said. Pension plans lost an average of $576 or 0.4 per cent, it said.
“Canadian households felt the effects of a significant decline in equity market valuations over the fourth quarter of the year,” Peter Miron, senior vice president of Environics Analytics’ research and development, said in a statement.
The Bank of Canada hiked the benchmark interest rate five times from 2017 to last October, contributing to higher debt levels. A report on average net worth this year might show an improved picture as the stock market has recovered, housing prices are rebounding in most areas from the introduction of mortgage-curbing rules and the central bank has kept interest rates at 1.75 per cent.
“Canadians are actively taking steps to rein in their debts and build up their savings,” Miron said, for instance by converting their variable-rate, non-mortgage debt into locked-in loans. He said Canadians were “relatively prudent in terms of their debt acquisition and repayment in 2018” as “four provinces saw the average debt per household decline.”
Those provinces were Newfoundland and Labrador, Nova Scotia, Saskatchewan and Alberta, according to the report. It showed Ontario had the largest gain in household debt at 3.9 per cent to $165,937 followed by a 2.9 per cent increase in British Columbia to $193,260, the most in the country.
Overall, Ontario was the best performing province for the year as a preference for bank deposits over stocks shielded households from market volatility, the report showed. The province’s average net worth per home eased a “negligible” $62 to $794,916, Environics said.
B.C. kept its lead as the province with the highest average net worth per household at $943,742, although it fell 1.2 per cent as real estate values grew slower than the national average, according to the report. Even so, residents were the country’s top savers, stashing more than 6.4 per cent of their incomes into bank accounts and investment portfolios, the report showed. That’s more than five times the national average of 1.2 per cent, Environics said.
Alberta and Saskatchewan had the largest declines in average net worth per home at 4.1 per cent and 2.9 per cent, respectively, as housing values and liquid assets fell, the analysis showed.
Vancouver continued to lead cities with the highest net worth per household at $1.14 million, buoyed by the expensive housing market, which in turn produces the country’s highest household debt at $245,313, the data show. Toronto was second in net worth per household among cities at $977,698, Environics said.
Calgary ranked third with a 3.6 per cent decline to $840,417 per home because of the stock market correction and lower property valuations, according to the report.
“What makes these households particularly remarkable is that they tend to have a lot of their wealth in liquid assets like stocks, bonds, investment funds and even traditional bank accounts, unlike the households of Toronto and Vancouver,” Environics said. “The stock market declines of 2018 were felt keenly by the households of Calgary and the continued cheap oil-induced malaise weighed on Calgary’s real estate market.”
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