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18 Sep, 2022 06:00

Canadians’ wealth suffers biggest drop on record

Household net worth plunged 6.1% in the second quarter of 2022, Statistics Canada reports
Canadians’ wealth suffers biggest drop on record

Canada’s households saw a decline of almost $1 trillion Canadian dollars ($775 billion) in net worth in the second quarter amid sliding real estate costs, Statistics Canada reported this week.

That was the largest decrease since at least 1990, according to the report. It also eclipsed the 5% drop in the third quarter of 2008 during the global financial crisis.

Statistics showed that household credit market debt as a proportion of disposable income rose to 181.7%, from 179.7% in the first three months of 2022.

The value of residential real estate holdings held by households sank by $323 billion in the three months between April and June, while financial assets dropped by $409 billion.

“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 agency stated.

That drag on net worth from housing is likely to persist into the second half of this year, with home prices in the country still falling and borrowing costs expected to rise further.

Last week, the Bank of Canada hiked its interest rate by three-quarters of a percentage point to 3.25% to try to cool red-hot inflation, which has risen to its highest level in decades. The regulator is expected to hike the rate again next month by another half point.

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