First National Financial LP

Residential Market Commentary - Worth more, spending less

  • First National Financial LP

Canadians are getting wealthier and have reined-in their spending.

The latest numbers from Statistics Canada show the country’s household debt to disposable income ratio shrank in the first quarter of this year.  It dropped to 172.3% from 174% in the fourth quarter of last year.  Canadians now owe about $1.72 in debt for every dollar of their after-tax income.

Another metric – the household debt service ratio – which measures total obligated payments of principal and interest on credit market debt as a proportion of household disposable income, fell to 13.45% in Q1, from 13.55% in the fourth quarter.  The household savings rate rose to 13.1%, from 11.9%.

In the past year Canadian households have added about $2.4 trillion to their overall net worth for a total of $13.7 trillion; a 22% increase, which is the largest on record.

Analysts point to the hot housing market, strong stock markets, low interest rates, generous government supports, and the lack of spending opportunities due to the pandemic as the key reasons for the higher net worth and lower debt numbers.  As the pandemic fades they expect to see a return to old spending habits.

The increase in wealth is not being spread evenly across the economy though, illustrating the so-called “K Shaped” recovery that favours the financially secure and higher income earners over those with precarious employment and lower incomes.

The StatsCan numbers show home owners captured $730 billion of the wealth increase in Q1.  Renters got $43 billion.  The net worth of owners rose about $73,000 compared to about $8,000 for renters.