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Single family homes are seen against the skyline of Vancouver on Sept. 30, 2020.JENNIFER GAUTHIER/Reuters

Households in Canada have added billions to their total wealth over the COVID-19 pandemic, an unexpected outcome during a seismic economic shock.

Over the first nine months of 2020, the average household saw its net worth increase by roughly $30,600 or 5.4 per cent, according to Environics Analytics data provided exclusively to The Globe and Mail. In every province, net worth was on the rise.

About two-thirds of the average wealth gain came from rising home values, with the rest owing to a surge of savings. Changes in other assets (such as investments) and liabilities (such as mortgage debt) roughly offset each other.

The results come on the heels of a Statistics Canada report, which estimated that average net worth dipped briefly last year, then jumped in every income and age bracket.

It’s a situation that highlights how the pandemic downturn bears little resemblance to past recessions. Disposable income is up sharply. Home prices have never been higher. And stock markets erased their losses months ago.

But the spoils are not shared evenly, and the two biggest wealth drivers – real estate and excess deposits – are inextricably tied to a crisis response that’s sent borrowing rates to record lows and spent billions to bolster incomes at a time of historic work disruption.

That leaves Ottawa in a tricky position. Faced with a historic deficit, the federal government will need to wind down its unprecedented support over time, but without causing financial distress for those on the wrong side of the K-shaped recovery.

Benjamin Tal, deputy chief economist at CIBC Capital Markets, says he was “absolutely” surprised by the wealth gains over the pandemic. But “a huge amount of stimulus is going into the economy.”

The wealth effect is found widely. In percentage terms, Environics said average gains were fairly similar across low- and high-income neighbourhoods. (The company’s calculations are based on data from Statscan, Equifax, Teranet and others.) But they also found a range of outcomes by province – and with a heavy impact from real estate.

Despite getting hit hard by the virus, Ontario saw its average household wealth rise by close to $50,000 or 7.2 per cent – both provincial bests. Roughly three-quarters of that was driven by real estate. In the Toronto and Ottawa areas, the average gain in home values was around $43,000 over nine months.

It’s a different story in Alberta and Saskatchewan, where average household wealth rose by 0.7 per cent and 1.8 per cent, respectively, slowed by weaker home values.

The wealthy have certainly benefited. In high-income neighbourhoods, where average annual household income is between $190,000 and $300,000 before tax, home values rose by an average of $106,000. In lower-income areas, it was less than $10,000.

“Those who are not homeowners ... would have not benefited at all from the significant increases in the real estate market,” said Lynne Wolfson, senior research associate at Environics. (About 30 per cent of Canadian households are renters.)

The frenzied market is driven by several factors, including a consumer desire for more space. But crucially, central bankers slashed their key interest rates to keep credit flowing, which led to record-low mortgage rates that helped finance the boom.

“Low interest rates were a huge, huge force [in] stimulating activity in the domestic market,” Mr. Tal said.

For many, a key driver of wealth was savings. Over the first nine months of 2020, households saved around $150-billion, the data show. (Recent bank estimates put excess savings at $200-billion.) The vast majority (90 per cent) has gone toward deposits, which include chequing and savings accounts, Guaranteed Investment Certificates (GICs) and term deposits. The rest was used to pay down debt, with a focus on credit cards.

In part, higher savings were driven by lower consumption because of health restrictions. But also, “we saw this massive influx of cash into the household sector, due to the size of government transfers,” Ms. Wolfson said. Government transfers to households jumped 51 per cent in 2020, or $119-billion, a sum that greatly exceeded lost wages.

The average household saw its deposits climb about $11,000 or 10.3 per cent over the first three quarters of 2020. Percentage gains were similar in low- and high-income areas.

But in dollar terms, the increases differed greatly. In high-income neighbourhoods, average deposits were up close to $55,000 per household. The wealthiest parts of Toronto and Vancouver were sitting on six-figure gains. In lower-income neighbourhoods, however, average household deposits were up by roughly $6,000.

For some households, added savings may be less a source of future consumption than a buffer to deal with a challenging labour market. Employment is down sharply for low-wage workers, while more than two million people are jobless and want work.

“People got hammered [by job losses] in the bottom [40 per cent] of the hourly wage distribution,” said Lars Osberg, an economics professor at Dalhousie University in Halifax. “It also means that pent-up consumer demand is concentrated at the top of the income distribution.”

Environics found the average Canadian household had lost around $2,000 in their investments over the first nine months of last year. Markets were slammed last spring as the pandemic escalated, before mounting a multimonth comeback. Since the end of Environics’s dataset, markets rallied further. It’s likely that households are now sitting on investment gains, rather than losses, if they’re tracking broad equity indexes.

The other side of the net-worth equation is debt. Statscan figures show Canadians lowered their non-mortgage debt last year, but also added $118-billion in mortgages, the largest annual increase on record. The value of real estate assets climbed by significantly more than mortgage debt, helping to bolster wealth.

Even so, the housing market is raising eyebrows of late. Bank of Canada Governor Tiff Macklem recently said there were signs of “excess exuberance,” but tamped down concerns of overheating.

Before the pandemic, consumer debt was a perennial worry for the economy, and the average household owed about $1.80 for every dollar of disposable income. That ratio has improved markedly because of the government’s financing of an income boom.

But as the pandemic eventually fades, and as government support winds down, household-debt ratios should climb and could prove to be a headache again.

“This is a temporary deleveraging that will reverse the minute we go back to normal,” Mr. Tal said. “As a society, we have never been so sensitive to the risk of higher interest rates.”

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