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Winnipeg real estate signs. (John Woods For The Globe and Mail)
Winnipeg real estate signs. (John Woods For The Globe and Mail)

Canada Competes

Financial report exposes tender spots across Canada Add to ...

While Canada weathered the storm of the recession better than the United States, its lessons still weigh heavily on our minds. That doesn’t mean Canadians are reacting uniformly in the face of financial stress, though; regional habits and market trends have weighed strongly on our reactions.

It’s no powerhouse yet, but Manitoba is now the country’s fastest-growing province in terms of prosperity. Alberta is still struggling; Calgary, once home to the country’s wealthiest denizens, is watching the oil-sands boom ease off. Meanwhile, risk-tolerant Nova Scotia saw its household net worth decline almost 5 per cent in 2011.

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These are just a few of the key findings released this week as part of WealthScapes 2012, an annual neighbourhood-level analysis of Canadian wealth. Conducted by Environics Analytics, the study, now in its fifth year, looks at Canadians’ financial health with data from Statistics Canada, the Bank of Canada, census figures, financial reports and more.

Here are six trends spotted in its 2011 study. You can also see net worth mapped to the neighbourhood level for five major Canadian cities.

1. We’re fiscal conservatives

Canadians were a cautious bunch in 2011. Safe investments like mutual funds trumped risky stocks for investors. “They’re looking for safety, rather than growth,” says Peter Miron, senior research associate with Environics Analytics. In other words, Canadians want to preserve the money they have rather than grow capital.

“Everyone,” Mr. Miron says, “is becoming more financially conservative.” This includes how Canadians keep their liquid assets – in the form of more conservative bonds, GICs and standard “demand deposit” bank accounts.

Martin Murenbeeld, chief economist with DundeeWealth Economics in Victoria, says this reflects the disinterest he’s seen in the risky side of the equity investment spectrum. “That’s not going to change soon, either.” His suggestion? Act like Warren Buffett. “Buy when things are cheap, and in the fullness of time, the market will recognize it.”

2. The debt-ridden west

Households in Vancouver and Victoria spend the highest amount in Canada on debt financing, leaving them vulnerable when interest rates increase. Those two cities spend an average of 12.9 and 11.4 per cent of their disposable income on debt financing, respectively; in Vancouver, that contributes to a household debt burden roughly three times the average disposable income. The rest of Canada isn’t much better, with debt financing sitting at about 10 per cent on average, but those in the west have sky-high housing prices to thank for their precarious situation.

“Data would suggest house prices in Vancouver are correcting as we speak,” says Mr. Murenbeeld, who believes this is an indication that West Coast mortgage holders are at risk.

Real estate prices in B.C. are about 50 per cent higher than the Canadian average – $428,589 compared with $279,090, on average – and debt rises with the prices. “If interest rates go up, they’re the first ones to be hurting,” Mr. Miron says.

3. Smaller players, bigger savings

Mid-size centres such as Regina, Victoria and Quebec City are becoming “cities of savers,” Environics suggests. In Quebec City, households are focusing more assets in bank deposits. Regina, Mr. Miron says, is reaping the benefits of Saskatchewan’s resource sector growth. “A lot of people are saving a lot more money.”

The aging population of Victoria plays a key role in its savings habits. “Victoria is relatively old, with a lot of liquid assets,” Mr. Miron says.

Mr. Murenbeeld, who lives in the city, says the older population is more concerned with savings than capital gains – “the return of money as opposed to a return on money.”

Wealth is also increasing more in mid-sized centres than in Canada’s major metros. Regina, Winnipeg and the Ottawa-Gatineau region all saw household net worth rise at least 2.8 per cent in 2011, which Environics suggests stems from keen savings habits.

4. Manitoba as a star player

Manitoba “has never been a star performer, but it’s never been a weak performer either,” Mr. Miron says. In terms of household wealth, the province is positioned to be the fastest-growing in the country, having seen a 2.3-per-cent growth to $270,639 in 2011.

While natural resources are often touted as the key driving factor in the Prairies, Mr. Miron says, the province’s diverse “everyman economy” helped drive its rise in net worth. “There’s a little bit of everything, and there’s private sector investment and infrastructure development there to drive it.”

Mr. Murenbeeld says Manitobans are feeding off of the province’s strong growth. “When growth is fairly strong, people tend to take on a little bit more risk,” he says. “You’re feeling more confident of income prospects and employment prospects.”

Manitoba and Saskatchewan are the only two provinces to increase their stock-based investments in 2011. The Environics analysis shows the provinces took 2011’s market downturns “in stride” and are investing further to replenish their portfolio losses.

Saskatchewan’s resource sector – namely oil, uranium and potash – has long driven its economy. Growth there and in Manitoba has kept confidence stronger than elsewhere, keeping residents interested in riskier investing, Mr. Miron says.

5. Nova Scotia sticks to its guns

Nova Scotia households saw a 4.7-per-cent decline in wealth in 2011. The province tends to be less risk aversive than the rest of Canada, Mr. Miron says, which meant they didn’t avoid the stock market to the extent other Canadians did. “They seem to be more at ease with taking those kinds of risks,” he says. He describes the attitude as “live by the sword, die by the sword” – these kinds of losses will likely not deter Nova Scotians from continuing their investments.

“Given the stock market corrections we saw in 2011, they got particularly burned. If the stock market picks up, they’ll be able to recover,” Mr. Miron says.

The only place that fared worse in Canada, the study says, is Nunavut, which Mr. Miron suggests may be due to territory’s reliance on migratory work.

6. Alberta’s still burned by oil

Alberta has suffered some of the biggest blows since the recession – Environics figures estimate the province’s average net worth has dropped 7.1 per cent since 2007.

“By and large, oil sands rule everything out there,” Mr. Miron says. Oil was hot in 2007, but when it tanked in 2008, Alberta’s housing market took the blow hard. Rising household debt and declining real estate values countered mild recovery.

“The real estate market was so hot beforehand,” Mr. Miron says. “We haven’t seen a return to the front-burner growth.”

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