Wealth boost from residential real estate moderating

by Ephraim Vecina21 Mar 2019

In the current environment, residential real estate won’t output the same wealth it has provided over the last few years, RBC economist Josh Nye warned.

During Q4 2018, Canadian household net worth fell by 2.8%, for a total decrease of $304 million. In terms of real dollar value, this was the largest drop observed by RBC so far, Nye said.

The overall value of residential real estate nationwide also declined by 1.4%, reaching the weakest quarterly level since 2008.

Nye cited the tightened qualification requirements introduced by B-20 early last year as the major contributor to these lower values.

Read more: Vancouver’s high-rises enjoying sustained growth in value

These findings accompanied the latest Statistics Canada analysis of household debt, which uncovered that debt now comprises around 14.9% of the average household’s disposable income.

StatsCan also stated that in the final quarter of 2018, each Canadian needed to pay a seasonally-adjusted average of $1.79 for every dollar of disposable income, up from the $1.78 during Q3 2018.

Additional research from BMO revealed that 7.3% of the country’s household income is going towards interest charges, the highest proportion in nine years.

Nye stressed that this indebtedness will continue to make itself felt through most of this year.

“It will take a long period of household incomes outpacing credit growth to deliver meaningful improvement in the debt-to-income ratio,” Nye wrote in a client note, as quoted by GlobalNews.ca. “We’re not seeing that yet.”

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