Residential Market Commentary - More wealth and more debt

On the whole Canadian households were a little wealthier at the end of the second quarter but their debt-to-income level was also up.

The latest National Balance Sheet released by Statistics Canada shows the collective net worth of Canadians rose 1.5% to $17.9 trillion in Q2.

Net worth has increased for seven consecutive quarters.  Most of the increase is attributed to financial assets which grew by 2.7% in Q2, largely due to resilient equity markets.  Non-financial assets, which experienced two straight quarters of increases, dipped slightly in Q2 weighed down by lower residential real estate values.  The Canadian Real Estate Association reports home prices decreased 1.2% in the second quarter, erasing first quarter gains.

Canada’s household savings rate slipped to 5.0% (seasonally adjusted).  Household spending grew by 1.2% while disposable income rose by just 0.3%.  The household debt-to-disposable-income ratio climbed to 174.9% in Q2, up 1.1% from Q1.  That means Canadians now owe $1.75 in credit market debt for every dollar of disposable income.

Disposable income is the money left over after paying taxes and other mandatory fees such as Employment Insurance and Canada Pension Plan contributions.

The total seasonally adjusted stock of household credit market debt, which includes consumer credit and mortgage and non-mortgage loans, rose 1.0%, surpassing $3.1 trillion in Q2.  Mortgages account for almost 75% of the total.