Canadian real estate boom helps add more than $ 1 billion to national net worth
Soaring house prices helped increase Canadian household wealth at a record pace in the first quarter of the year, even as COVID-19 closures shut down huge swathes of the economy .
According to Statistics Canada, national net worth jumped from over $ 1 trillion to almost $ 15 trillion, an increase of 7.7% from the previous quarter.
The value of residential real estate rose $ 595 billion, a staggering 9.4 percent, for the third consecutive quarterly increase. For context, Statistics Canada points out that the value of residential real estate increased by just over $ 750 billion in 2020.
Longer term, the agency says the average selling price of a home has increased 87% over the past 10 years.
Canadians continue to take advantage of low interest rates by accumulating mortgage debt. It fell to $ 29 billion, but follows an all-time high of $ 32.1 billion in the previous quarter and the second highest on record.
During this time, the higher interest rate debt is paid off. According to Statistics Canada, non-mortgage loans, including consumer credit, have fallen $ 13.5 billion since 2019 to $ 786.5 billion.
Also see: The latest real estate news for house prices, mortgage rates, markets, luxury properties and more on Yahoo Finance Canada.
Swap high interest debt for low interest debt
With fewer places to spend money, savings rates have also increased. The seasonally adjusted household savings rate fell from 11.9% in the fourth quarter to 13.1% in the first quarter. Statistics Canada says it’s at double-digit levels since the second quarter of 2020.
All of this helped push the household debt ratio down to 172.3% in the first quarter from 174% in the fourth quarter. In other words, there is $ 1.72 of debt in the credit market for every dollar of household disposable income.
But BMO economist Priscilla Thiagamoorthy says the data doesn’t necessarily mean everyone has their homes in order.
“Canadian household finances improved in the first quarter of this year, as the key ratio of household debt to disposable income moved further away from the record highs seen before the pandemic,” Thiagamoorthy said.
“Even though mortgage debt growth could continue to slow over the next few quarters, the flow remains high. As such, housing market imbalances and still high household debt remain a key vulnerability of the Canadian economy.
The results echo a report released earlier this week by Equifax, which found that new mortgages were up 41.2% in the first quarter compared to the first quarter of 2020. It also revealed that the card debt of credit had fallen to the lowest in six years.
“The number of cards per consumer has been on a downward trajectory since 2016. Consumers are moving away from multiple cards and paying more attention to their credit. Younger consumers, who are more likely to miss credit card payments, have also seen a drop in their spend-to-payment ratio, ”said Rebecca Oakes, associate vice president of advanced analytics, Equifax Canada.
“Likewise, Gen Z has managed to reverse that ratio and are paying off their credit card debt as well.”
Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on twitter @jessysbains.
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