Easy come, easy go — especially during a credit driven asset boom. Statistics Canada (Stat Can) reported household net worth made a sharp drop in Q2 2022. The decline was actually the largest in history, coming in at nearly $1 trillion. It’s not you, it’s a lot of money to vaporize in a single quarter. Most assets are forecast to begin a recovery soon, with real estate being the exception. Home prices have been forecast to see a prolonged downturn, as rates continue to climb higher.
Canadian Household Net Worth Dropped Nearly $1 Trillion
Canadian households saw the sharpest drop in net-worth ever. Stat Can reported a combined net worth of $15.22 trillion in Q2 2022, down 6.1% ($990.1 billion) from a year before. It still came in 1.89% ($282.12 billion) higher than last year. The quarterly drop was the largest on record, and annual growth was the smallest since 2018.
Canadian Household Net Worth
The value of assets held by households minus their liabilities.
Source: Statistics Canada; Better Dwelling.
Real estate isn’t the only segment suffering from a downturn — it’s everything. “The value of wealth was weighed by a trifecta of sagging equities, bonds, and home prices,” said Shelly Kaushik, an economist at BMO.
Adding, “That caused household net worth to fall to 1,003% of disposable income, down from the all-time highs at the turn of the year but still above pre-pandemic levels.”
Household Net Worth Is Still Boosted From 2020
Most households aren’t hurting from the record drop, since it followed record gains. Last quarter’s net worth was still 26.9% ($3.22 trillion) higher than Q1 2020, when interest rates were first cut. We might have just exited the most profitable recession ever. How that was distributed is a different story for another day.
It might not be a quick recovery for sagging net worths, according to experts. “While equity and bond markets may recover in Q3, the housing market will continue to cool from aggressive Bank of Canada tightening. The latter factor will continue to weigh on the value of household assets in the coming quarters,” explained Kaushik.