Canada

Canada’s Super Rich Actually Own A Bigger Share of Wealth Than Previously Thought

Canada’s wealth inequality issues are bigger than previously estimated – which really is something. The Parliamentary Budget Officer (PBO), a non-partisan office that advises the Canadian government, has created a new model to estimate wealth held by the country’s richest households. The new estimate shows Canada’s one-percent actually holds a much bigger share of total wealth than previously thought. On the flip side of that statistic, it means the share held by the bottom 80% of the population was overestimated.

New Estimates On Canada’s Super Rich

The PBO’s new model captures more wealth, and surprise – it largely belongs at the top. Originally the Survey of Financial Security Public Use Microdata File (SFS PUMF) was used to determine the breakdown. Unfortunately, since the super rich don’t do surveys, it left a lot of upper wealth unassigned. That meant they needed a new model to estimate it.

The new model is the high-net-worth Family Database (HFD), and it better captures the top end of wealth.  The HFD draws data from the National Balance Sheet Accounts, and helps assign it. The result is, the wealth share of the top one percent rises by 12 percentage points, versus the previous model. Here’s how the country looks with this reassignment.

Canada’s Richest Families Have More Wealth Than Previously Thought

The new model suggests Canada’s super rich own a much bigger share of wealth than thought. The top 1% of households were previously estimated to hold 13.7% of wealth in Canada. Under the new model, that number rises to 25.6% of total wealth. The top 0.01% alone saw their estimated share jump from 0.4% to 5.6% of wealth.

Share of Wealth Held By Canadian Households

The share of wealth held by households, using the old SFS PUMF methodology, and the newer HFD model.

Source: PBO, Better Dwelling.

Naturally, that redistribution of the pie means someone’s share of wealth was overestimated. Can you guess who? The middle 40% of households were previously estimated to have held 30.5% of total wealth in Canada. That drops to just 25.3% under the newest model. The bottom 40% went from 2.3%, to just 1.2% of wealth. In other words, 80% of families hold a little over a quarter of the wealth in Canada.

You Need Over $6.1 Million To Be In Canada’s 1%

The revised numbers mean a ticket to the one percent club is fairly steep. To be in Canada’s one-percent, you need a minimum net-worth of $6.1 million. The top 0.1% requires a minimum net-worth of $29.3 million now. The 0.01% has a minimum net-worth of $143.1 million dollars. Net-worth is defined as household assets minus liabilities.

How Much Do You Need To Be Rich In Canada?

The minimum net-worth needed to fit in family wealth quantiles.

Source: PBO, Better Dwelling.

The vast majority of people across Canada actually fit in the lower 80% of households. The middle 40% of households have a net-worth between $100,000 and $1 million. Below $100,000, and your household net-worth is in the bottom 40% of households. Just used all of your cash to make a 5% downpayment on a million dollar home? You’re in the bottom 40% of wealth.

The PBO’s new model reveals rich households have a much larger share of wealth than thought. This also means the share of wealth held by the majority of Canadians was massively overestimated. As one bank might put it, most of you are poorer than you think.

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13 Comments

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  • Trader Jim 4 weeks ago

    This is going to be used to implement a wealth tax. Almost guaranteed.

    • Marc 4 weeks ago

      Why did you think so much money was pouring out of Canada offshore?

      • Manoj 4 weeks ago

        Trader Jim, you are spot ON. This is the narrative under the pretence of a review they have suddenly changed their models.

        French economist Thomas Piketty who is a communist/marxist and he is was the figure head at the WEF and he has been spearheading the coalition of economists, politicians and historians in Europe and Canada and has pug together a 50-page manifesto.

        The Liberals, NDP, Greens and Nancy Paloci (US Democrats). They all want to introduce a Wealth Tax and are busy trying to figure out how to calculate the wealth of Individuals and Businesses and they want to levy a tax of between 1 -4% tax on anyone who has a Net worth of some arbitary $$ figure they will make up.

        The West is still in love with Communism. This has never worked in history and it will never work in the modern era. These people sit in their Ivory Towers and dream up this ideas of how to tax people who go the extra mile by risking their own money in order to build businesses which employ thousands of people and in doing so they create wealth for themselves and their employees who indirectly pay the taxes which pays the wages and pensions of the politicians.

    • Manoj 4 weeks ago

      Trader Jim, too right Canada and EU are looking to introduce a Wealth Tax.

      This was an agenda at last years World Economic Forum in DAVOS to support Piketty (French Economist) and take a very elitist view from an ivory tower, proclaiming this will end wealth inequality.

      There is saying A Graders work for C Graders and B and D Graders work for Government 🙂 Off course the C Graders become the wealth creators by their distinct ability of being able to think for themselves and ask questions.

      • Binkley 4 weeks ago

        As the British Empire collapsed the wealth was squirreled away into offshore accounts – a string of “tax havens” that mostly trace their way back to the City of London.

  • KG 4 weeks ago

    This is why the concept of real estate wealth was always so ridiculous. Move everyone up, by letting them think they live in a million dollar home.

    Now they all think they’re the one percent, without considering *everyone* just made that money. The floor moved up, but by allocating to slower moving segments of wealth building, you’re just moving with the status quo.

    The government should be lowering the accredited investor barrier, so people with lower amounts of income can be exposed to higher risk products. Especially in the US, where the operations are essentially backstopped against losses.

    • Manoj 4 weeks ago

      KG, you are spot on. People have no idea what is coming around. They give with one hand take it with their other hand. $6M is a very small amount in terms of wealth. There are 1000s of Canadians, Foreigners and Shell Companies that own 10’s of multimillion dollar worth Real Estate in places like Vancouver and Toronto GTA.

      My neighbour owns 3 duplexes in a row and each is worth more than $3M dollars each in Vancouver and rents them out. He paid $300k for each 10 years ago.

  • Gabriele Di Bernardo 4 weeks ago

    This is nuts…the fact that a net worth of 2.3 million or more puts you at minimum in the top 5% shows the problem with our society. 2.3 million really isn’t a lot as many homes here in the GTA are worth close to if not more than that (currently).

    • Tom Wolfe 4 weeks ago

      $2.3M minus the $1.1M mortgage, minus the $250K HELOC, minus a couple VISAs for $50K, minus a couple or 3 years property tax at $25K, leaves $875K. But then that agent appraised $2.3M is actually bank appraised at 60% for $1.4M.

      Bank says ‘Welcome to the other side! I’ll have your house now.’

  • Manta 4 weeks ago

    Thats why you need a real estate speculator tax, anyone or any corporation that own more than 1 residential real estate should be heavily taxed. This should balance the budget and solve the housing crisis with one stroke.

    • Manoj 4 weeks ago

      You make a valid point about speculation taxes. However what is more important is controlling the purchase of average family homes by foreigners who other than having to pay very low property taxes when compared to the asset value, as a result they do not contribute to local economy and yet they are allowed to inflate the real estate values and take the gains in most cases without paying any capital gains taxes because of the systemic antiquated rules based on a honor system and the rampant corruption in the organized real estate industry that exist.

      If you are not a Citizen then you have no right yo buying homes in areas where the local live and work. Off course you can’t tax and drive away foreigners all together out of the market because otherwise there will be no capital inflows.

      Hence, tgmhe foreigners can be allowed to speculate in the high end markets such as West Vancouver and Vancouver West in BC and similarly in the Toronto GTA areas.

      Secondly, the property taxes have to be increased to 10% of assessed values not the cheap rates the foreigners pay today which is the same as what the local work Canadians pay in addition to all the other indirect taxation they pay. Which the foreigners do not pay.

      Thirdly, the same must be done for Citizens. If you buy a second home for rental income and speculation. This must be taxed higher for property transfer taxes and property taxes because the asset is being used for income producing and must be treated as a business.

      Last but not least, we must ask for qualifications of the politicians who stand for election. Please don’t elect the because they smile and are charismatic.

      People have to realize, for every job the applicant must be able yo show and prove they have degree or qualifications and experience in order to be considered. But to stand in an election you require ZERO qualifications!!

      This is why we find ourselves in the situation we are in today!

  • A Div Investor 4 weeks ago

    The million dollar dwelling is a tremendous problem. Qualifying to own is not wealth. It’s taking extreme leverage betting that the appreciation will never stop. We suddenly see that, due to Covid, no longer allowing airbnb to operate and stopping immigration will cool the condo market… especially with 20,000 condos come online this year. Rents have been dramatically decreasing. I’m not for stopping immigration. I am for a significantly increasing taxation on vacant units, an increase in tax on rental condos and no longer allowing airbnb to operate within large areas of residential dwellings. Solving housing is a big step for helping the, dare I say, 80% underclass.

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