Canadians felt the economic pinch of the pandemic almost immediately. Statistics Canada (Stat Can) data shows household net-worth made a big drop in Q1 2020. The decline, the largest since before the Great Recession, was big enough to wipe out almost a year of wealth gains.
Household Net-Worth
Household net-worth is the value of all assets held by households, minus their liabilities (a.k.a. debt). For example, if a household only has $20,000 in savings, and $5,000 in debt – their net-worth would be $15,000. At the national level, all of the household assets are taken, and household debt is subtracted. This gives us a rough idea of where household assets are moving at a national scale.
One important note to remember is this is an aggregate at the national level. It includes no information on distribution, so the winners and losers are a mystery. If the wealthiest households see gains, while working class households see losses – the number could be even, or possibly higher. If the number falls, wealthier households could have lost money, and working class households could have gained. The total of household net-worth is important for getting the movement of the country, but doesn’t tell us a lot about inequality.
Canadians See Almost A Year of Gains Wiped Out In Q1
The first quarter was only partially exposed to the pandemic, but it was a big hit to net-worth. Household net-worth reached $11.29 trillion in Q1 2020, down 3.78% from the previous quarter. This leaves the total up just 0.36% from the same month last year. Considering the quarter was only exposed to the pandemic for a few weeks, it’s a substantial loss.
Canadian Household Net-Worth
The aggregate net-worth of Canadian households, reported quarterly.
Source: Stat Can, Better Dwelling.
Canadian households saw the largest single quarter decline in a decade. The first-quarter’s 3.78% drop is the biggest since Q3 of 2008, preceding the Great Recession. On an unadjusted basis, it wiped out almost a full year of gains. In real terms, this number has turned negative.
Canadian Household Net-Worth – Quarterly Change
The quarterly change in the aggregate amount of household net-worth across Canada.
Source: Stat Can, Better Dwelling.
The first-quarter was only partially exposed to the pandemic. Most of the hit to GDP was observed and is assumed to have happened in the second quarter. This is likely when the declines to household net-worth will peak. Although everyone from the Bank of Canada to the state-owned mortgage insurance company, are betting on residential real estate declines in the second half. Considering this is the single largest component of household wealth, net-worth declines could continue into the rest of the year.
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How much of that is real estate?
About 75-85% now. It used to be 65% just 10 years ago, which should tell you a lot about how the government skewed investment and neglected the rest of the economy.
You’re telling me just 20% of everything in the Canadian economy outside of real estate… that’s what’s left as net-worth? That’s an unreal statistic.
Chart from Visual Capitalist shows US households with more money, tend to own less real estate. I guess they don’t scale up perpetually like in Canada.
https://www.visualcapitalist.com/chart-assets-make-wealth/
Probably an even higher percent in in Q2, since real estate prices weren’t impacted, but everything else was.
Q4 and Q1 2021 are going to be the biggest hits to net-worth. That’s when defaults are expected.
Houses in Vancouver are selling at or near 2015 prices
Looks like the bottom for BC with province with the lowest debt to GDP thanks to prior fiscally responsible liberal provincial govrmentment should lead canada in growth once super low interest rates ignite the global economy.
Time to start an investigation of politicians and real estate corruption, they have created the biggest housing bubble in Canadian history.