Canadian Incomes Are Plummeting From Last Year’s Peak: Desjardins

Canadians hoping higher incomes will boost home prices are in for a disappointment. In Q2 2020, the average household income soared, raising home price expectations. An analysis from Dejardins shows the average after-tax household is much lower in Q1 2021. In just one year, incomes soared, fell, and are now basically where they were a year ago. The boosted expectation of higher home prices? Well, that’s so far stuck.

Canadian Household Incomes Have Dropped 8% From Last Year’s Peak

Canadian households rode an income roller coaster over the past year. The average after-tax household income fell to $90,657 per year in Q1 2021, down 2.54% from the previous quarter. It still remains 2.39% higher, possibly matching inflation. The bump in Q2 2020 that pushed household incomes to a new high, proved to be temporary. The average is now 8.20% lower than at last year’s peak. There goes the narrative of soaring incomes.

Canadian After-Tax Household Income

The annualized average after-tax household income for selected regions.
Source: Desjardins; Stat Can; Better Dwelling.

Toronto Household Incomes Have Dropped 4% From Last Year’s Peak 

Household incomes in Greater Toronto also failed to make any progress. The average after-tax household income fell to $102,616  per year in Q1 2021, down 0.14% from the previous quarter. Incomes are virtually flat from last year, down just 0.06% — a dollar shy of $60. Household incomes have dropped 4.26% from the Q2 2020 bump, proving it too was temporary. A lot of noise and theories on higher local incomes last year. The reality fails to show that, with households not even keeping up with inflation.

Vancouver Household Incomes Have Dropped 3% From Last Year’s Peak

Greater Vancouver households didn’t see much progress in their incomes either. The average after-tax household income slid to $100,631 per year in Q1 2021, down 0.40% from the previous quarter. It was also virtually flat from the same quarter last year, about twenty bucks higher. Compared to the Q2 2020 peak, the average is now 3.33% lower. In other words, it’s failed to keep up with inflation this year as well.

Canadian Household Incomes Are Down Significantly From Peak

The percent change in average after-tax household income from the Q2 2020 peak to Q1 2021.
Source: Desjardins; Stat Can; Better Dwelling.

Montreal Household Incomes Have Dropped 6% From Last Year’s Peak

Greater Montreal incomes are surprisingly much lower than Toronto or Vancouver. The average after-tax household income is $78,463 per year in Q1 2021, up 0.88% from the previous quarter. It works out to 5.16% higher than the same quarter a year before. Even with the high growth, households are still down 6.61% from the second quarter peak.

Canadian household incomes soared in the second quarter of last year. This pushed many to believe households bucked the downturn, and wages pushed higher. In reality, this was due to government transfers like CERB. The income it replaced was twice as large as the income lost during the pandemic. Like it or not, datawise — it skewed the interpretation of events for many people. 

Last year’s income surge helped to accelerate the narrative of affordability. If incomes were surging, the current prices could rise and see affordability improve. In reality, it was just a temporary bump, that’s largely disappeared. Now that incomes are falling, the narrative of it supporting higher home prices is tough to follow.

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  • David Chan 3 years ago

    A Realtor said incomes don’t matter the other day. lol.

  • Tia Wolfe 3 years ago

    This is before the inevitable tax hike.

  • Axel McLion 3 years ago

    I wonder what Holton and others pushing the inflation narrative will have to say about this? Maybe Elon Musk will buy 3 million houses with his newly printed $1 trillion to prop up the market? Obviously your average Joe isn’t going to pump it up with his stagnant wages and rising cost of living (stagflation) which makes housing less affordable not more….

    • Omar 3 years ago

      You’re joking, but you know someone is out there boorishly explaining that eventually, the government will pay us to buy homes. Incomes won’t matter.

  • J M 3 years ago

    How can CERB be considered “income” at all in these calculations?
    It shouldn’t be.. and it shouldn’t be for applying for a mortgage, nor should EI, etc.

    Then again, I’ve never delved into the shadowy world of 3rd party “Mortgage Brokers”, where income is whatever you can imagine it to be….

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