Canadians are richer than ever after 2016 Expansion

Posted by on September 5, 2017

Canadians are richer than they have ever been, a new report states, and thanks to increasing property and stock markets, the country now boasts four cities in which the average household net worth is over $1-million: Vancouver, Toronto, Calgary andnbsp;Victoria.

According to the yearly Wealthscapes report from Environics Analytics, nationwide household net worth rose 12 percent over last year to $770,635, while household debt grew 4.4 percent. Canadians also increased their economies by 5.6 percent and their investments by 13.2 percent lastnbsp;year.

Last year’s momentum has carried well into this season. On Friday, Statistics Canada said second-quarter gross domestic product grew at an annual rate of 4.5 percent, propelled by vigorous consumernbsp;spending.

Household spending grew at an annual rate of 4.6 percent. Real estate price appreciation could be one factor making Canadian homeowners especially confident and spend-happy, based on Peter Miron, lead programmer of the Wealthscapesnbsp;report.

“The biggest story by far this season is real estate. The growth in real estate prices has been jaw-dropping from the Golden Horseshoe region and Vancouver. Even when you step out of these significant markets there is extremely strong real estate growth,” Mr. Miron said. The report is based on 178 fiscal and investment figures from January to December, 2016, by an assortment of sources such as the Bank of Canada, Equifax, Teranet-National Bank and Statisticsnbsp;Canada.

Once-quieter property markets in Southern Ontario were flourishing last year. Real estate values in Oshawa, just east of Toronto, grew by 25 percent, with net worth in the area visiting a corresponding 17.3-per-cent jump. Net worth jumped by 15.1 percent in Hamilton and 14.7 percent in St. Catharines-Niagara, also markets which had home-pricenbsp;gains.

However, the report warns that the sustainability of a genuine estate-fuelled riches is questionable. Wealthscapes states Vancouver, Toronto and Victoria are seeing possible housing bubbles, as average property holdings worth grew 21.8 percent, 19.7 per cent and 19 per cent respectively. Although British Columbia implemented a 15-per-cent foreign-buyers taxation this past year in an effort to cool the industry and ward off speculators, Vancouver property prices rebounded from the effect of the tax measures, using a 5-per-cent jump in the first 3 weeks ofnbsp;2017.

Ontario’s housing measures, which also included a foreign-buyers tax, weren’t announced until April of this year, so its effects are not reflected in the Wealthscapesnbsp;report.

Calgary, the fourth “millionaire” town, tells another story — one that is not reliant on land values. Alberta was hit hard by the oil decrease in 2014 but by 2016, the state’s average household net worth grew 9.6 percent to $1,039,607 and a lot of the increase resulted from Canadian equity markets’ strong performance. Liquid assets rose 15.7 percent to $406,522 as anbsp;outcome.

“The thing about Alberta’s families is they often hold a greater volume of liquid assets. They are less risk averse than the rest of Canada,” Mr. Miron said. “They have always been this way, even from before the fiscal crisis. They tend to have younger families,” which promotes more equitynbsp;possession.

While Alberta was the leader in asset development, all states benefited from strong economies, as total assets rose 10.5 percent nationwide. The value of stock portfolios rose 17.3 percent to $71,990 across Canada. That and the surge in savings shows that baby boomers, a generation that accounts for 27 percent of the populace, are preparing for retirement and building their own nest eggs. However, Albertans were stashing away money also, regardless of the population skewingnbsp;younger.

“Alberta was stocking away around $10,000 per family. They had been saving up for a rainy day in 2016,” Mr. Miron said. “A lot of the unusual behaviour can be explained by people being worried by their own economic prospects. Will the price of oil comenbsp;back?”

While assets grew nationwide, so did debt. Household debt in 2016 climbed to $139,387 despite earnings only growing 1 percent this past year, but Mr. Miron indicates this figure can also be tied to property. Consumer debt grew 2.6 percent while mortgage debt climbed 5.6 pernbsp;cent.

“A lot of this is explainable by the generations. Millennials are moving into their first homes and carrying on mortgages,” Mr. Mironnbsp;clarified.

The 69.2 percent of Canadian households that own their homes are visiting their net worth increase at a significantly faster rate compared to 30.8 percent of people who don’t have a house. In the wealthiest 20 percent of neighbourhoods nationally, household net worth grew by 14.1 percent, while the lowest 20 percent only had increase of 7.5 percent. Mr. Miron indicates that this is contributing to a broader wealthnbsp;gap.

“When you find a boom in the housing market or the stock exchange, it is more beneficial to individuals who are wealthier in the first place,” Mr. Mironnbsp;stated.

Otherwise, the report and continuing developments indicate the country as whole will continue to flourish. While the character of the market is cyclical and property growth in certain areas of the country is hitting unsustainable levels, Mr. Miron says there is nothing in the information pointing to a recession any timenbsp;shortly.

“You usually need a couple of negative impacts to observe a recession but at the moment we do not even see one. I see an increasing number of millionaires in the long run,” Mr. Mironnbsp;stated.

Courtesy: The Globe And Mail

Posted in: Market News


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