Canada Household Net Worth Advances on Record Realty Gain

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The net worth of Canadian households rose sharply in the first quarter, as the value of residential real estate accelerated by a record amount in the three-month period. According to Statistics Canada, households since the start of 2020 have added 2 trillion Canadian dollars, or the equivalent of US$1.65 trillion, reflecting a blistering real-estate market and a strong rebound in financial markets following a virus-induced plunge. Analysts are of the view the Canadian economy will rebound strongly in the second half of 2021 as households use wealth accumulated during the pandemic to spend on services once most virus-related restrictions are lifted. Overall, the data agency said Canada's national net worth climbed 7.7% in the first quarter from the previous three-month period, to reach C$14.97 trillion. Most of the gain was concentrated in the household sector, as its net worth--the value of assets minus liabilities--increased 6% to C$13.70 trillion. The value of residential real estate increased by a record 9.4%, or nearly C$600 billion, in the first quarter, marking a third consecutive quarter of strong growth. By comparison, the data agency said, the value of real estate increased by roughly C$750 billion for all of 2020. The most recent national housing data indicates Canadian house prices, on an adjusted basis, rose 23% on a one-year basis, and sales activity for April--while down from March's level--still represented the best April performance on record. Some economists have warned about real estate's outsize role in the Canadian economy, and how that could be exposed in the next downturn. Real estate as a percentage of after-tax income rose to 487.4% in the first quarter, up substantially from the end of 2019 when it stood at 440.3%. The data agency said this reflected a squeeze on overall affordability. Statistics Canada added the seasonally-adjusted household saving rate rose to 13.1% in the January-to-March period, up from the 11.9% level in the previous quarter although down from a 27.4% peak in the second quarter of 2020. Disposable income rose, it said, bolstered by higher wages and an elevated level of government transfers. The Canadian government has taken an aggressive fiscal response to the pandemic, sending hundreds of billions to households affected by economic restrictions. Households also made record net purchases of mutual fund units in the first quarter, as individuals used their buildup in savings to invest in tax-friendly retirement-savings plans.