Canadian households are a little poorer and a little deeper in debt. The latest numbers from Statistics Canada show the country’s national wealth diminished and the infamous debt-to-income ratio increased in the fourth quarter of 2018.
The net worth of the household sector dipped 2.8% in the final three months of last year, to $10.74 billion. The slowing housing market was a factor but the main cause was a drop in the value of “financial assets”, led by a 7.5% decrease in the price of stocks and other investment fund shares.
The fourth quarter of 2018 was the worst quarter for real estate since Q4-2008. A 1.4% decline in the value of residential real estate is pegged with leading an overall drop of 1.0% in the value of “non-financial” assets. In general real estate is the biggest non-financial asset for any household.
Canada’s worrisome household debt-to-disposable-income ratio edged up again at the end of 2018. It is now 178.5%, or $1.79 in debt for every $1.00 that is left after all of the other bills are paid. Most of that increase was triggered by mortgage borrowing. Demand for mortgage loans was up, while other consumer credit borrowing declined. The Bank of Canada calls the high debt-to-income ratio the biggest domestic threat to the country’s economy.
StatsCan is offering some reassurance. It points out that the first two months of this year have shown signs of a rebound. Employment numbers for both January and February were far above expectations. February also showed an uptick in wage growth the exceeded forecasts.