Equity and housing markets boost household wealth in Q1 2024

Household net worth increased by $548.2bn in Q1 2024, driven by strong equity and housing markets

Equity and housing markets boost household wealth in Q1 2024

According to Statistics Canada, households were wealthier in the first quarter of 2024 as their net worth increased by $548.2bn (+3.3 percent) to $16.925tn.  

Equity markets, with the S&P 500 Index up 10.2 percent and the S&P/TSX Composite Index rising 5.8 percent, contributed to this growth. The housing market also rebounded, with residential real estate values rising by $213bn.   

Households' total financial assets grew by 3.6 percent (+$349.3bn) to reach over $10.022tn, setting a record high for the second consecutive quarter. Non-financial assets increased by 2.1 percent (+$207.6bn).  

Financial liabilities, primarily mortgage and non-mortgage debt, rose by $8.7bn, marking the slowest quarterly expansion (+0.3 percent) since the first quarter of 2023, as high interest rates influenced household decisions.   

Wealth distribution remains uneven across Canadian households. As of the fourth quarter of 2023, over 90 percent of net worth belonged to homeowners. The highest wealth quintile averaged over $3.3m per household, while the lowest quintile had liabilities exceeding assets.   

The household saving rate increased to 6.9 percent in the first quarter of 2024, the highest since the first quarter of 2022. Disposable income gains (+1.8 percent) outpaced nominal consumption expenditure increases (+1.2 percent).   

Households added $15.5bn to their currency and deposits, the smallest accumulation since the third quarter of 2021. In response to rising interest rates, preferences shifted towards fixed-term deposits, which comprised 47.8 percent of personal deposits at chartered banks by the end of the first quarter of 2024.   

Households invested $23.8bn in mutual fund shares, with most inflows directed to equity-focused exchange-traded funds, driven by strong performance in global equities, particularly in technology companies. Inflows to money market funds were at their lowest since the first quarter of 2022.   

The value of household residential real estate rose 2.6 percent in the first quarter of 2024, following declines in the second half of 2023. Resale market activity increased by 16.0 percent year-over-year, with the average resale home price surpassing $700,000 in March 2024.  

However, Ontario and British Columbia saw declines in house prices despite increased resale activity.   

Household credit market borrowing stabilized at $27.2bn for the second consecutive quarter. Mortgage debt demand slowed to $17.7bn, while non-mortgage debt demand rose to $9.5bn, primarily from consumer credit.   

The household debt service ratio, measuring debt payments as a proportion of disposable income, fell from 14.98 percent at the end of 2023 to 14.91 percent in the first quarter of 2024. Disposable income growth (+1.9 percent) outpaced debt payments (+1.4 percent), easing debt service obligations. 

Mortgage interest payments reached a record $25bn, while mortgage principal payments decreased slightly to $12.2bn. Household credit market debt as a proportion of disposable income dropped to 176.4 percent from 178.0 percent, indicating $1.76 in debt for every dollar of disposable income.   

Federal government borrowing increased to $48.2bn in the first quarter of 2024 from $21.5bn in the fourth quarter of 2023, primarily through bonds and treasury bills.  

This borrowing was driven by a $23.3bn payment for the First Nations Child and Family Services settlement and loan forgiveness from the Canada Emergency Business Account (CEBA) program. The federal government's net financial liabilities to GDP ratio rose to 32.7 percent from 31.7 percent.   

Private non-financial corporations reduced their demand for funds by $9.4bn due to significant repayments of CEBA loans. Non-mortgage loan repayments and redemptions outstripped new issuances, while bond issuances increased.  

The debt-to-GDP ratio for private non-financial corporations fell to its lowest level since the fourth quarter of 2017.   

National net worth increased by $488.3bn in the first quarter of 2024, driven by gains in national wealth and the international investment position.  

The total value of non-financial assets in Canada rose by 1.1 percent to over $17.013tn, supported by a housing market rebound, while the value of natural resources declined by $75.5bn due to a slowdown in energy production.