Canadians saw their net worth climb by nearly 8 per cent last year as real estate and investment values soared, pushing average household wealth levels to a new high and offering a clear indication that many Canadians have put the recent recession far behind them.
An analysis of wealth by Environics Analytics shows the average household in Canada had total assets of $564,834 at the end of 2013 and average debt of $122,705, for average net worth of $442,130. Average wealth was up 7.7 per cent from the end of 2012 and 28 per cent from the end of 2007 before the recession began.
"Over all, 2013 was a very good year for Canadian balance sheets," said Peter Miron, senior research associate at Environics Analytics.
Increasing real estate values are continuing to play a key role in wealth gains, but the analysis shows that gains on investments are becoming a more important component in wealth. Investments climbed by 10.4 per cent last year to $145,348 per household on average, while assets in other savings vehicles such as bank accounts or term deposits climbed by 2.2 per cent to $83,652 per household.
The investment gains came as Canadian and U.S. markets posted strong returns, increasing the value of shares and mutual funds, which are widely held by many Canadians. Mr. Miron said some of the increase in investment wealth was also due to higher savings rates with more new money going into investments as household finances improved and there was greater optimism about potential investment returns.
The WealthScapes analysis is based on 121 financial and investments statistics from a variety of sources, including Statistics Canada and the Bank of Canada. It focuses on the key wealth categories of real estate and financial assets, but does not paint a complete picture of wealth in Canada because it does not include wealth held in pension plans, insurance policies and physical assets such as vehicles or art.
The analysis shows Albertans posted the greatest gains last year with average household wealth increasing by 10 per cent, causing the province to leapfrog over Ontario into second place behind British Columbia. B.C. residents had an average net worth of $591,047 last year, followed by Alberta at $531,067 and Ontario at $523,969.
Mr. Miron said B.C. has led the country in wealth in the seven years since Environics launched its analysis, but Alberta could move into top spot in future years because of its faster pace of growth. B.C. recorded the slowest growth in wealth of any province last year, but the key variable in future growth will be real estate prices.
"Real estate is where you really see the volatility, especially between provinces and between years," Mr. Miron said.
In keeping with the provincial trend, the data also shows the wealth gap is shrinking between Vancouver, Toronto and Calgary, which respectively posted average household wealth of $710,095, $693,652 and $680,377 in 2013 due largely to the value of real estate in the three expensive markets.
For the first time, the analysis for 2013 also looked at the national statistics broken into five wealth tiers, showing that the richest 20 per cent of Canadians saw their net worth climb by 8.1 per cent in 2013. However, the lowest 20 per cent posted even greater wealth gains of 8.7 per cent last year, which Mr. Miron said may be due to increasing real estate values in smaller urban markets, such as Sudbury, Ont., that have not previously had the gains seen in cities such as Toronto and Vancouver.
Mr. Miron said the most baffling trend in 2013 was seen in St. John's, which posted the highest growth in liquid savings and investment assets among Canada's 20 largest cities, while also recording the highest growth in household debt. He said he has not seen a similar trend in seven years of compiling the data, suggesting it could be a sign of high optimism about future income security if people are borrowing more while also saving more.
"You don't usually see liquid assets and debt increasing at the same time. It's an enigma," he said.
The analysis also showed the growth in household debt last year was entirely due to a 3.3 per cent increase in mortgage debt, while consumer debt such as credit cards and other loans was unchanged from 2012, which suggests growing restraint about taking on new debt.
Mr. Miron said it is also encouraging to see mortgage debt growing a lower pace than real estate values, which means many people are unwilling to ratchet up borrowing to match the pace of growth in house prices. Previously, he said mortgage debt was growing faster than real estate values.
"That's actually a pretty positive sign in the grand scheme of things," he said. "That's a very unusual thing – we haven't seen that happen before."