September 5 , 2017
New Weathscapes release reveals Canadians' monetary fortunes continue to rise, foreshadowing growth for fintech, financial services
TORONTO--Canadians are the wealthiest they’ve ever been, according to a new analysis by Environics Analytics (EA) based on the latest release of its financial database, WealthScapes 2017. Overall, 2016 proved to be a good year for Canadians’ balance sheets, as rising assets, pensions and real estate values increased their net worth and modest borrowing kept their debt levels in check. Nationwide, household net worth rose an impressive 12.0 percent over the previous year to $770,635, while household debt grew a relatively restrained 4.4 percent to an average of $139,387 in 2016.
This fiscal snapshot emerged from data in WealthScapes 2017, now in its tenth year documenting the financial well-being of Canadian households. Based on 178 key financial and investment statistics updated to December 2016, the release includes data on employer pension plans and tax-free savings accounts.
Despite the growing risk of asset overvaluation, the new data suggest that nationwide, households have made concerted efforts to create a solid financial footing for the future. Canadians increased their savings and investments last year—by 5.6 percent to $95,710 and by 13.2 percent to $182,238, respectively—while tempering their consumer and credit card debt, which grew by 2.6 percent and 3.3 percent, respectively.
“For the most part, 2016 was a good-news financial story,” says Peter Miron, vice president of demographic and economic data at EA and the lead developer of WealthScapes 2017. “Strong performance in the stock market buoyed Canadian investments. The biggest housing markets experienced strong real estate appreciation. And many Canadians increased their saving rates. This is the wealthiest Canadians as a whole have ever been.”
EA, the Toronto-based marketing and analytical services company, created WealthScapes to help financial institutions, retailers and charities analyze the fiscal profile of current and potential customers, identify promising markets and develop business strategies. As with previous releases, WealthScapes was built using sophisticated modelling techniques and aggregated, privacy-compliant, small-area data from a variety of authoritative sources, such as the Bank of Canada, Equifax, Statistics Canada and The Teranet-National Bank Regional and Property Type Sub-Indices™.
Among the noteworthy findings coming out of the WealthScapes 2017 release:
Major Metropolitan Areas
1. Millionaires Club Expands to Four: In 2015, Vancouver became the first Canadian city to report average household net worth over $1 million. This past year, three cities joined that exclusive club: Toronto, Calgary and Victoria. While Vancouver continues to reign as the city with the highest average net worth at $1,217,630, up 19.4 percent over the previous year, Toronto claims second place with an average net worth of $1,154,107, a 17.0 percent rise. The third wealthiest city, Victoria, now has an average net worth of $1,055,468, up 15.4 percent. And despite the soft recovery in oil prices, Calgary households posted an average net worth of $1,039,607, an increase of 9.0 percent over the previous year. According to WealthScapes, about 3.2 million households—or 22.2 percent of Canada’s 14.4 million households—are found in neighbourhoods that have a net worth above $1 million.
2. Vancouver and the Golden Horseshoe Home to Fast-Growing Wealth: In addition to having the highest net worth, Vancouver also posted the biggest percentage increase in wealth last year, up 19.4 percent. But four of the next five cities on the “booming money” list are located in the Golden Horseshoe: Oshawa households posted the second greatest percentage gain in wealth last year, with net worth increasing 17.3 percent to $852,689. Oshawa’s economy benefitted from real estate values that grew by 25.0 percent—nearly double the 13.2 percent national average—to $647,337. Next on the list is Toronto, which grew 17.0 percent to $1,154,107. Victoria, fourth among the fastest wealth growth cities, realized a 15.4 percent gain and now households have an average net worth of $1,055,468. Rounding out the fifth and sixth spots in net worth percentage gains are Hamilton, up 15.1 percent to $891,924, and St. Catharine’s-Niagara, up 14.7 percent to $679,740.
3. Housing Bubbles Looming in Three Cities: WealthScapes identified a run-up in housing prices in Vancouver, Toronto and Victoria, indicating likely housing bubbles. In Vancouver, average real estate holdings appreciated 21.8 percent to $932,056. In Toronto, they rose 19.7 percent to $839,223. And in Victoria, they increased 19.0 percent to $669, 814. While real estate growth remains strong in other markets—outside of Toronto, Vancouver and Victoria, real estate values rose by 9.1 percent in 2016, to $372,341—the skyrocketing growth in home values in Toronto, Vancouver and Victoria would seem difficult to sustain. And though provincial governments in B.C. and Ontario have taken steps to dampen demand, there was no sign of bubbles bursting as of the end of 2016. “Both provinces have attempted to cool their housing markets,” says Miron, “but it’s unclear whether they’ll give up some of their 2016 gains in 2017.”
4. Where the Investors Are: For most Canadians, the largest share of their liquid assets (defined as the sum of savings and investments) is held in investments (stocks, bonds, mutual funds and segregated funds). Buoyed by a strong stock market in 2016, the average household’s savings increased 5.6 percent to $95,710 and investment portfolios rose nearly twice that amount, up 13.2 percent to $182,328. But investing differed across cities. Among households in Calgary, the top market for investments, 79 cents of every dollar of liquid assets are held in stocks, bonds and funds. The investment rate is similar in Edmonton (78.7 cents) and Halifax (77.2 cents). But the residents of St. Catharines-Niagara appear to be the most risk averse, devoting just 56 cents of every liquid asset dollar to investments. As a result, Calgary’s and Edmonton’s households benefitted the most from 2016’s strong stock market with average liquid asset holdings up 13.6 percent and 19.1 percent, respectively, to $503,049 and $352,492.
5. Rich Still Getting Richer, Producing First Province of Millionaires: The three wealthiest provinces in 2016 were the same as they’ve been for years: British Columbia, Ontario and Alberta. But for the first time, one Canadian province has attained an average household net worth of over $1 million. In top-ranked B.C., net worth reached $1,024,042, up 17.2 percent over 2015. Meanwhile, second-place Ontario rose 14.2 percent to $918,493 and third-place Alberta increased 9.6 percent to $869,631. The drivers behind these rising fortunes differ, however. B.C. and Ontario remain the wealthiest provinces in large part because of sizzling real estate markets in Vancouver and Toronto. Average real estate values rose 19.9 percent to $731,434 in B.C. and 17.4 percent to $606,585 in Ontario. And average household net worth grew in these provinces at rates more than 50 percent above the national average of 12 percent. Albertans’ 9.6 percent rise in net worth came in below the national average, the result of real estate values having increased a relatively tepid 3.8 percent to $514,742; Alberta’s rise in net worth is mostly attributable to substantial growth in liquid assets—up 15.7 percent to $406,522—with equities accounting for much of that growth.
6. Quebec’s Good Year: Despite a relatively quiet real estate market (up a moderate 5.3 percent), Quebec still recorded a 6.7 percent growth rate in average net worth, to $512,594. Its rising fortunes were driven mostly by an increase in household pension assets, up 5.1 percent—far greater than the 3.6 percent national average—to $141,400. This change also reflects the continued popularity of workplace pensions in the province. And Quebec households managed to restrain their debt, which increased by only 2.9 percent to $97,841, and led non-Atlantic Canada provinces with the lowest growth in its debt-to-disposable income ratio, 1.1 percent. These figures reflect improvement to the financial stability of households in Quebec during 2016.
7. Alberta: The Equity King: After enduring the oil shocks of 2014 that drove down wealth, Alberta bounced back in 2016 with its average household net worth growing a robust 9.6 percent to $869,631. But unlike B.C. and Ontario, real estate appreciation was not the driver of Alberta’s growth. Instead, its rise in liquid asset holdings led all provinces—up 15.7 percent to $406,522—thanks in large part to the impressive performance in the stock market.
8. Debt Growth Outpaces Income Growth: Nationally, debt levels grew at a slightly higher rate than previous years, increasing 4.4 percent to $139,387 per household in 2016. Unfortunately, household income grew only 1.0 percent to $94,365. But consumer debt, which rose a modest 2.6 percent to $39,551, accounted for far less of the total debt increase compared to mortgage debt, which jumped 5.1 percent to $99,836, underscoring a small shift to lower interest rate debt products. As Miron observes, “The 13.2 percent rise in real estate values was jaw-dropping and completely eclipsed the increase in mortgage debt.” In other words, mortgage debt grew, but not nearly as much as real estate values and “that’s a good sign as it adds to net real estate equity,” Miron adds.
9. Getting Retirement Ready: Nationwide, Canadians’ total assets rose a dramatic 10.5 percent. But the rise wasn’t only due to hot real estate markets in cities like Toronto and Vancouver. In 2016 equity markets boomed and the value of stock portfolios rose 17.3 percent to $71,990. Indeed, all investment classes—stock, mutual funds, bonds and segregated funds—experienced growth in 2016. The only asset class that didn’t experience significant growth was employer pension plans: They rose just 3.6 percent to $146,973, in part due to slowly climbing long-term interest rates.
“Canadians are looking increasingly well prepared for their retirement,” says Miron. “Even with interest rates starting to increase, they’ve managed strong growth in their liquid assets and real estate portfolio. So they’ve gotten the double benefit of being active savers and earning an increased rate of return on their money.”
10. Gap Between Rich and Poor Widening: As in the past, EA analysts broke the national data into five wealth tiers to assess the relative finances of different segments of the population. Although Canadians in general became richer in 2016, not all benefitted equally, and disparities in household net worth grew more pronounced. In the highest wealth quintile of neighbourhoods, net worth grew by 14.1 percent to $1,790,588, thanks to the strong performance of real estate and the stock market. But in the bottom quintile, net worth grew 7.5 percent to $206,765, a rate just over half that of the highest quintile. Active savers and households less willing to take on high debt loads contributed to increased wealth in the bottom quintile. But with little real estate or stock holdings, households in the bottom quintile did not benefit from increases in those assets.
11. Retiring Boomers Driving a Savings Surge: A disproportionate number of Baby Boomers are on the cusp of retirement, typically a period marked by high savings. And because Boomers make up a large portion of the total population—27 percent or 9.4 million Canadians age 51 to 70—whatever they do has an outsized impact on the nation. Their desire to sock away as much as possible in 2016 no doubt contributed to the healthy 10.5 percent rise in Canadians’ liquid assets—cash, savings and investments—to $278,038. The nation’s other large population cohort, the Millennials (born between 1981 and 2000), have yet to amass appreciable liquid assets, although many are making their first investments in real estate as they advance in their careers and begin forming families.
12. Smooth Sailing Forecasted: Although several oil-dependent provinces are still experiencing economic headwinds, WealthScapes data indicate that 2017 should produce continued strong growth. Miron notes that the economy shows no signs of a recession or rapidly rising interest rates. And while oil prices haven’t rebounded to pre-2014 levels, further significant declines are not expected. In the oil-rich provinces of Saskatchewan and Newfoundland and Labrador, households saw their net worth rise at moderate levels in 2016—by 5.1 percent and 4.7 percent, respectively—though well below Alberta’s impressive 9.6 percent gain. Given that the energy sector is notorious for its cyclical nature, up is always good.
“Overall, the economy is doing decently,” concludes Miron. “We got a little hiccup in 2015 from the oil price shocks at the end of 2014. “But in 2016, the economy was firing on all cylinders, leaving Canadians well positioned entering 2017.”
One of North America’s premier marketing and analytical services companies, Environics Analytics helps customers turn data and analytics into insight, strategy and results. Established in 2003, EA offers the full range of analytical services—from data supplier to strategic consultancy—and provides authoritative reports, software and modelling approaches to solve business challenges. EA is also a member of the Environics group, a unique alliance of companies dedicated to providing intelligent research, analytics and communications.