Canadian household wealth falls by nearly $1 trillion as real estate, financial markets pummelled

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The value of Canadian residential real estate fell for the first time since 2018 in the second quarter of 2022, helping to drag down the overall value of Canadian household wealth by a record $990 billion.

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According to Statistics Canada‘s national balance sheet and financial flow accounts figures released on Monday, the total value of all residential real estate in the country fell by $446.3 billion to $8,655.6 billion during the quarter, a marked reversal from the $344 billion rise recorded in the prior quarter.

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“The streak of gains in real estate that began in late 2018 was halted by a housing market grappling with rapidly rising interest rates,” the federal agency said in the report.

In terms of household wealth, non-financial assets including real estate declined by $389.8 billion while financial assets fell by a record $530.6 billion in the quarter. Despite the decline, the value of household residential real estate remains 41 per cent above the level recorded at the end of 2019.  An increase in financial liabilities of $69.8 billion as outstanding mortgage debt continued to expand, helped drive the overall drop in household wealth to nearly $1 trillion, or 6.1 per cent, the steepest quarterly drop since data tracking began in 1990.

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“Today’s release revealed that households faced rising financial headwinds in the second quarter,” Ksenia Bushmeneva of TD Economics said.

Bushmeneva attributed the drop in household wealth to the selloffs in financial markets earlier this year combined with a decline in house prices.

Average resale prices dropped to roughly $710,000, while home resale inventory levels remained lower than average. By July, the average resale price dropped further to $635,000.

Debt growth also outpaced income gains, as households added a near record $56.3 billion of debt in the second quarter. They now have $1.82 in credit market debt for every dollar of household disposable income.

Statistics Canada’s figures also showed the savings rate fell to 6.2 per cent in the second quarter from 9.5 per cent in the previous quarter, as rising expenditures outpaced tepid income growth.

A key measure of housing affordability also reversed course. Real estate as a percentage of disposable income fell to 546.7 per cent from 581.3 per cent in the second quarter of 2020.

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