Canadian households saw a net decline in wealth

Despite hints of financial prudence, plunging liquid assets and other negative trends have hurt people's fortunes

Canadian households saw a net decline in wealth

For Canadian households, last year market the end of nearly a decade of wealth accumulation amid a coagulation of negative trends, according to a new analysis from Environics Analytics.

The firm drew its findings from its Wealthscapes 2019 financial database, which is current to the end of December 2018 and reflects information on real estate, employer pension plans, tax-free savings accounts, credit-card debt, and other aspects of household finances.

Investment portfolios were hit hard
On a national level, the firm reported a 7.3% year-on-year dip in investment portfolios, which ended the year at an average level of $181,231. Stocks suffered a massive blow at the end of 2018, dragging portfolio values down by 14.5% to end the year at $64,989. Bond and commercial paper holdings saw a more modest 5.5% decline to $8,503. Meanwhile, investment products that include mutual funds and segregated funds underwent a slight dip of 2.6% in valuations to $107,739.

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Rising interest rates also impacted employer pension plans, which shrank by 0.4% on average to $150,252. But on the positive side, higher rates pushed more Canadian savers to consider GICs and term deposits, which saw a 10.3% jump to $41,645. That increase, along with a 0.7% rise in traditional savings and chequing account balances to $100,212, helped drive traditional bank deposits up 4.4% to $100,212.

The report also made note of households’ relative prudence in terms of debt acquisition and repayment last year. The average household income increased by 3.4% to $99.654; real estate assets, which rose by 1.6% to $393,789, also propped up households’ net worth last year.

Collectively, Canadian household assets sagged by 0.5% to $825,484 in 2018. That was compounded by rising levels of household debt, with growth split evenly between consumer debt (up 2.2% to $41,962) and mortgage debt (up 2.4% to $104,731).

All jurisdictions were hurt – but not equally
At the provincial level, Ontario was the best performer as it experienced a muted decline — the average household lost $62 in its net worth to end the year at $794,916 — owing to residents’ taste for non-stock market liquid assets and a small increase in real estate holdings.

British Columbia maintained its standing as the wealthiest province with $943,742 in average household net worth, even after a relatively significant drop of 1.2%. Real estate values in the province grew by 0.6%, more sluggish than the national average, and its household debt growth of 2.9% outpaced the nation overall. But British Columbians also aside $6,506 or 6.4% of their incomes in bank accounts or investments, resulting in a savings rate five times greater than the national average of 1.2%.

Notably, Newfoundland underwent the smallest decline in liquid asset holdings per household, partly due to a provincial preference for relatively conservative investments such as traditional bank deposits and active saving habits. It also was among just four provinces where the average debt per household decreased last year.

The most substantial declines in net worth per household happened in Alberta and Saskatchewan, which were both hurt by declines in real estate prices and valuations in liquid assets. Alberta households saw their wealth decrease by 4.1%, whereas their counterparts in Saskatchewan saw a 2.9% dip.


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