Canada Expects Pent-Up Savings To Boost Home Sales, But They’re Greatly Exaggerated

Canadian households have been saving at one of the highest rates ever recorded. They saved an extra $167 billion last year, and everyone thinks it’s going to be spent in their industry. Statistics Canada (Stat Can) data shows this might sound a lot larger than it actually is when broken down. It’s definitely going to provide a boost to spending. However, everyone didn’t get a down payment-sized windfall like many assume.

Canadian Households Saved An Average of $13,500

Canadian households started stashing away a lot more cash during the pandemic. The average net savings per household was $13,546 in 2020, about $12,389 higher than the previous year. It’s quite a bit of money, considering households saved an average of less than $2,000 the year before. It doesn’t quite have the same ring as households saved $167 billion though, does it?

Canadian Average Household Savings By Age

The average net savings for Canadian households in 2019 and 2020, grouped by the age of the household head.
Source: Stat Can; Better Dwelling.

In order to save a downpayment at this rate, it would take just a few years… or decades. If every year were like the pandemic, it would take an average of 3.5 years to save a downpayment on a typical home. If every year was like the year before the pandemic, it would take about 41 years. Buyers will be ready somewhere between 3.5 and 41 years if home prices stay still. 

Households 35 and Under Saved About 1/7 The Price Increase of Homes

Breaking it down by the age of the household head, those under 35 saved a little more than average. These households on average saved $20,577 in 2020, up $13,357 from the year before. It may seem like a decent amount, but a typical home increased at 7x the amount of savings in 2020. The  2019 dollar value is about 1/19 the size of the home price gains. If home prices stall here, and a pandemic continues forever, they’ll totally nail this. 

Canadian Average Change In Household Savings By Age

The dollar change in the average net savings for Canadian households from 2019 to 2020, grouped by the age of the household head.
Source: Stat Can; Better Dwelling.

Households 35 to 44 Years Old Saved The Most 

Households led by people between 35 to 44 years saved more — the most of any cohort, actually. On average these households saved $30,375 in 2020, up $15,412 from the year before. First-time buyers in expensive cities on average are in this cohort.

Older Households Saved Less On Average

Households led by people between the age of 45 to 54 saved just a hair less than the younger cohort. On average these households saved $29,325 in 2020, up $18,001 from the year before. This demographic is more likely to already own a home but might be looking for an upgrade. This cohort’s savings were boosted by just a little over the monthly increase for homes in April. Increased savings, but homes are a lot more expensive than a year ago.

Households 55 to 64 Years Old Saved Less Than $1,000 In 2019 

Older households are saving a lot less than those a little younger, with those led by people aged 55 to 64 seeing a sharp drop from the last cohort. The average household in this demographic saved $14,225 in 2020, up $13,558 from the year before. Yeah, they saved just $668 for the whole year in 2019 on average. This demographic is very likely to own their home though, and likely see it as a “forced’ savings plan, like many do. 

Senior Households Are Spending, Not Saving

Canadian seniors aren’t saving, they’re spending a lifetime of savings. The average household in this cohort spent $11,053 of their savings in 2020, which is $5,865 less than the year before. Pandemic supports helped to offset a significant chunk of spending. This demographic is still a net-spender though.

There are a lot of expectations for these pent-up savings, which sound huge. The real estate industry expects it to fuel downpayments. Economists see it as boosting household consumption (dinner, anyone?). In reality, when averaged, it’s just a few months of income these households saved. There’s a good chance it’s about the size experts say people should have saved for an emergency… like few before the pandemic had.

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  • Pepp 3 years ago

    The question is, if inflation eats away savings why would you save when you know inflation is here?

  • Doomcouver 3 years ago

    The government stimulus was at least double the $ value of the immediate economic damage from the pandemic. That’s obviously part of what’s showing up in people banking the difference. Post-pandemic the savings rate is going to crash harder than it’s ever crashed before, and a lot of it will be leaving the country. The tsunami of Canadians looking to leave Canada (temporarily or permanently) will likely be massive.

    • MRJ 3 years ago

      It’s shocking (but not really) to hear so many Canadians talk about leaving Canada. I just accepted a job overseas and can’t wait to leave Vancouver. I don’t plan on ever coming back. Way more money and far better quality of life where I’m going. It’s sad to see what’s happened to Canada over the last few years.

  • Ahmed 3 years ago

    A lot of analysts have said the reason they think they’re letting inflation run is that households have savings that can absorb a higher cost of living more easily, while running down the value of government debt. Diabolical, really.

    • Oldguy 3 years ago

      This works until the rate on 10 year US treasuries hits 7%. At that point they will have to choose between a 40 cent Canadian dollar and a massive asset bubble crash.
      Inflation is always the last resort and Canada is out of options. Bitcoin, anyone?

      • Little Birdie 3 years ago

        Bitcoin is a poor alternative. Bitcoin mining is an energy intensive process, meaning more emissions and GHG, which in turn impacts climate change.

        I don’t think there’s a “quick fix” for this and instead it’s going to take actual work from our government to find a viable solution (so we’re screwed).

  • WS 3 years ago

    “while running down the value of government debt. Diabolical, really.”

    it will actually increase the debt, because inflation will ultimately kill efficiency, reduce productivity, and consumption ,resulting in less economic growth and less government revenue.

  • D 3 years ago

    Increase rates, deflate assets. Some of us will need to swing (mortgage holders) for this economy to get back on track.

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