Eric Beauchesne
Sun
Real estate prices help Canadians set record net worth of $5 trillion dollars
OTTAWA — Continuing increases in the value of their homes and in their investments here and abroad have boosted the net worth of Canadians to a new record high of nearly $5 trillion dollars, Statistics Canada reported Friday.
The agency says the value of the difference between what Canadians — including individuals, businesses and governments — own, and what they owe to foreigners, rose 2.7 per cent, or $131 billion, in the final quarter of last year to $4.9 trillion.
That works out to $150,500 for every man, woman and child in the country.
Over the year, the rise in national net worth accelerated to 9.3 per cent from 5.7 per cent growth in 2005.
In the final quarter, the increase in net worth was strongly supported by the sharp decline in Canadians’ net foreign indebtedness, as the slowdown in the economy in the quarter acted as a drag on the growth in national wealth, it noted.
“The strong gains in net worth pose a sharp contrast to sluggish real GDP growth and help explain why consumer spending and the housing market have remained robust in Canada,” said J.P. Morgan economist Ted Carmichael.
Canadians net foreign indebtedness fell by almost half in the quarter as the value of Canadians’ foreign assets increased nearly twice as fast as their foreign liabilities, Statistics Canada said.
The increase in foreign assets was driven by sustained strong investment flows, sharp gains in foreign equity prices and a depreciating Canadian dollar.
The household sector, especially, posted strong gains in net worth.
“Household net worth leapt 3.8 per cent in the fourth quarter,” it said, noting that was more than double the increase in the previous quarter. “Strong gains in the value of Canadian and foreign equities drove this increase, supported by continued growth in the values of residential real estate.”
The benchmark S&P/TSX index ended the year at an all-time high of just under 13,000, boosting the value of individual stock and pension assets, while the value of residential real estate continued to rise, reflected in a 1.4 per cent increase in new housing prices in the quarter.
However, households continued to accumulate mortgage and consumer credit debt.
“As a result, household debt continued to outpace personal disposable income,” Statistics Canada said, noting that households currently carry about $1.10 in debt for every dollar of their disposable income.
“However, the gains in both financial and non-financial assets in the fourth quarter reduced the ratio of household debt to net worth to 17.8 per cent, down from 18.2 per cent in the third,” it added.
