Home Economy Canadian household wealth declines by nearly $1 trillion

Canadian household wealth declines by nearly $1 trillion

by SuperiorInvest

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Canadian residential property values ​​fell for the first time since 2018 in the second quarter of 2022, helping to pull down the total value of Canadian household wealth by a record $990 billion.

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According to Statistics CanadaIn the national balance sheet and cash flow accounts released Monday, the total value of all residential real estate in the country fell by $446.3 billion to $8,655.6 billion during the quarter, a significant turnaround from the $344 billion increase seen in the previous quarter.

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“The run of gains in real estate that began in late 2018 was halted by a housing market that struggled with rapidly rising interest rates,” the federal agency said in a report.

In terms of household wealth, non-financial assets, including real estate, fell by $389.8 billion in the quarter, while financial assets fell by a record $530.6 billion. Despite the decline, the value of residential real estate for households remains 41 percent above the level seen at the end of 2019. A $69.8 billion increase in financial liabilities as outstanding mortgage debt continued to rise helped the overall decline in household wealth. nearly $1 trillion, or 6.1 percent, the steepest quarterly decline since data began tracking in 1990.

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“Today’s report revealed that households faced increasing financial headwinds in the second quarter,” said Ksenia Bushmeneva of TD Economics.

Bushmeneva attributed the drop in household wealth to a sell-off in financial markets earlier this year, combined with a drop in property prices.

Average resale prices fell to around $710,000, while inventory levels for resale homes remained below average. By July, the average resale price had dropped further to $635,000.

Debt growth also outpaced income growth as households added a near-record $56.3 billion in debt in the second quarter. They now have $1.82 of credit market debt for every dollar of household disposable income.

Statistics Canada data also showed the savings rate fell to 6.2 per cent in the second quarter from 9.5 per cent in the previous quarter, as rising spending outpaced tepid income growth.

A key measure of housing affordability also reversed course. Real estate as a percentage of disposable income fell to 546.7 percent from 581.3 percent in the second quarter of 2020.

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