New data shows Canadians are less wealthy (on average) than they were a year ago. This is the first time net worth values have fallen since the 2008 financial crisis. The results are published in the latest study released by Environics Analytics on Canadian household net worth called ‘WealthScapes.’
According to the analysis, the average Canadian household net worth fell by 1.1 percent or $7,594 in 2018. The reasons given for the decline are the stock market correction in 2018, declining values of pension plans and higher debt levels across the country.
The study says, “After almost a decade of wealth accumulation, the average Canadian household net worth declined slightly in 2018. While the latest financial snapshot of Canadian households includes some positive trends, growing debts, shrinking pensions and a sharp drop in liquid assets are putting pressure on families.”
It adds, “A significant pullback in the equity market in the final few months of the year was a significant factor in the decline, coupled with rising household debt levels and higher interest rates, which reduced employer pension plan values.”
All of this is leading to household net worth’s falling on average across the country. But there are parts of the country that are bucking this trend. Specifically in pockets of Toronto.
Higher real estate values are behind the better-than-average rise in net worth in places like Scarborough, East York, and Etobicoke. By and large these pockets did not see real estate values skyrocket as they did in places that were near the downtown core or along the Yonge street corridors. In many ways these areas are now playing catch up to the price increases seen in the rest of Toronto.
To provide some context, Toronto continues to be home to Canada’s second-highest net worth population. The average household net worth in the Toronto grew by 0.1 percent in 2018 to $977,698. Environics says, this growth was due to an above-average savings rate as well as slightly above-average real estate performance in 2018.
Whereas, the average Canadian net worth is $678,792.
We could call this scenario, Toronto the rich. Where wealth is rising faster than the average for the rest of the country, and average net worth remain higher too.
Toronto maybe the richest, but it did not see net worth rise the steepest. That title is held by the city of Moncton. It posted the largest gains in household net worth at 2.2 percent. The study says the New Brunswick city is not just relying on real estate prices rising to see their net worth rise: “Moncton’s households were actively building their savings faster than anyone else in Canada in 2018, on average stashing, away $11,097.”
Looking at all of Canada though, there are other positives stories emerging out of this data. Mostly that Canadians are saving more.
Peter Miron is the architect of WealthScapes at Environics Analytics. He says, “On a more positive note, Canadians are actively taking steps to reign in their debts and build up their savings. In fact, four provinces saw the average debt per household decline in 2018.” Those provinces are Alberta, Saskatchewan, Newfoundland, and Nova Scotia.
Canadian net worth falling for the first time in 10 years is not a positive story. But knowing there are pockets of Canada that are saving more, despite the financial pressures around them, is great news for the personal finances of everyday Canadians.