Toronto, August 25, 2015 – Canadians experienced a period of robust fiscal health for the 12 months that ended on December 31, according to WealthScapes 2015, the financial database released today by Environics Analytics (EA). The new numbers indicate that 2014 was a good year for Canadian balance sheets: While the stock market rose by 10.5 percent, household net worth increased 6.1 percent over the previous year, despite the growth in debt of 2.9 percent. Real estate overall didn’t overheat compared to recent years, increasing a solid but not-too-bubbly 5.0 percent in 2014. And the gap between rich and poor shrank slightly: the net worth of the bottom fifth of the populace grew by 9.3 percent over the previous year, compared to 5.6 percent for the top fifth. (Net worth is defined as the value of liquid assets, employer pension plans and real estate minus debt.)
These positive findings are among several results EA uncovered in WealthScapes 2015, now in its eighth year reporting household financial statistics. Despite recent economic concerns related to the oil market, the new data suggest that households have improved their balance sheets and may be in a stronger position to weather economic downturns. According to WealthScapes data, household stock portfolios have been growing and savings are on the rise, while credit card debt has ticked up a modest 0.3 percent.
“Many people have become fixated on the risks of debt,” says Peter Miron, senior research associate at Environics Analytics and lead developer of WealthScapes 2015. “But Canadian balance sheets are in very good shape—even better than prior to the financial crisis.”
EA, the Toronto-based marketing services and data analytics company, created WealthScapes to help organizations—like financial institutions, retailers, charities and universities—analyze the fiscal health of current and potential customers, identify promising markets and develop business strategies. Updated to December 31, 2014, the 2015 release has been expanded this year to include 178 financial and investment statistics, providing additional categories of data such as employer pension plans and tax-free savings accounts (TFSAs). As with previous releases, the database 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 and Statistics Canada.
Among the noteworthy stories coming out of the WealthScapes 2015 release:
1. Vancouver, Calgary and Toronto Still the Wealthiest. This trio of large cities retained the title as the wealthiest in Canada, with an average household net worth of $867,817, $835,823 and $826,883, respectively. The gap between the top three cities widened slightly, with net worth growth in Vancouver increasing by 8.8 percent. The next three cities with the strongest net worth growth were Edmonton at 8.4 percent, Toronto at 7.5 percent and Calgary at 7.0 percent. Vancouver continues to reign as Canada’s wealthiest city because of its pricey real estate—averaging $611,800 per household compared to $555,341 in Toronto and $524,737 in Calgary. In Canada’s most populous city, Toronto, growth in both real estate values and pensions helped push net worth up, while Calgary benefitted from a 7.1 percent increase in its real estate holdings. And Edmonton shot up to the second fastest growing city in terms of net worth because of its 7.3 percent increase in liquid assets—second only to Vancouver—which was driven largely by high rates of saving. While Toronto households withdrew $1,935 on average from their savings in 2014, Edmonton households socked away $4,290 on average.
2. Real Estate Remained Hot in Calgary and Toronto. Hot real estate markets like Calgary and Toronto remained hot—real estate holdings in Calgary rose 7.1 percent and 7.4 percent in Toronto. Meanwhile, real estate holdings in Edmonton and Vancouver, the most expensive market in the country, rose 6.1 and 6.0 percent, respectively. All of these markets had real estate growth higher than the national average of 5.0 percent. “The trend of Toronto and Vancouver driving up average real estate holdings in Canada continued in 2014,” says Miron.
3. Ottawa and Quebec City are Canada’s Pension Capitals. Pensions serve to level the wealth playing field: while some cities have particularly high concentrations of real estate and liquid assets, most cities share very similar levels of employer pension plan entitlements. The exceptions are cities with large public sector workforces, like Ottawa and Quebec City, where employer pension plans represent significant share of household net worth. In Ottawa, pensions grew 8.2 percent to $192,330 per household in 2014—the national average is $119,468—thanks mostly to concentrations of government and Crown Corporation employment. Meanwhile, residents in Quebec City experienced a similar story, with pension values increasing 6.1 percent to $158,906, likely attributed to provincial or national pensions. Residents of Windsor and Hamilton also reported growth in pensions, though most are related to the industrial sector.
4. Montreal’s Perfect Storm of Challenges. Of the top ten largest cities in Canada, Montreal has the lowest net worth—$459,231. Its anemic growth of 2.9 percent was less than half the national average, in part because of relatively stagnant growth in real estate values (2.2 percent, or less than half the national average of 5.0 percent). While Montreal households kept their debt in check, increasing at a modest 3.6 percent, they were actively drawing down liquid assets to the tune of $9,721, higher than even the $8,858 withdrawn by households in Calgary, the city with the second highest withdrawal rate. All this bad news comes on top of lackluster income growth due to a weaker local economy: At 1.5 percent, the growth rate in average household incomes comes in well below national and provincial averages. Montreal’s perfect storm—low income growth, net worth not keeping up and households withdrawing funds—was responsible for holding back Quebec’s performance in 2014. However, despite lacklustre growth in liquid assets, pensions and real estate holdings, average discretionary income (income less taxes, food and shelter costs) actually grew 2.5 percent, a bit better than the national average of 2.3 percent.
Calgary sits as Canada’s second wealthiest city, only surpassed by Vancouver. Overall, households averaged $835,823 in net worth, with neighbourhoods around Canyon Meadows and Harvest Hills reporting larger increases in 2014. However, areas in the downtown core like Richmond and Mission, along with neighbourhoods around the University of Calgary, experienced decreases in net worth.
Among Canada’s top 10 most populated cities, Edmonton’s average household net worth grew the most in 2014: up 8.4 percent to an average $649,404 per household. This growth varied throughout the city, with areas in St. Albert, and southwest Edmonton seeing more significant growth. Very few areas experienced a decline, notably pockets around Rexall Place and Spruce Grove.
In 2014, Montreal’s average household net worth was $459,231, a growth rate of 2.9 percent over 2013. However, this increase is about half the national average increase of 6.1 percent and the city lags well behind other major metros—including Calgary, Toronto and Vancouver—due to slower real estate appreciation. Changes in net worth were mixed across the city, with pockets of Ahuntsic-Cartierville and Longueil experiencing sharper declines and the suburban areas of Pointe-Claire and Boucherville showing more consistent increases.
The net worth of the Ottawa-Gatineau region grew at a rate of 5.3 percent, slightly below the national average of 6.1 percent, to $664,061 on average. Households on both sides of the provincial border registered similar values; city centres of Gatineau and Ottawa grew at 5.2 percent and 5.3 percent, respectively. Larger increases occurred in some areas of Kanata and Nepean, while some of the smaller communities in Ottawa’s core—such as Sandy Hill and Rothwell Heights—experienced declines of more than 15 percent.
Households in the Greater Toronto Area performed well in 2014, their net worth growing by 7.5 percent to an average of $826,883. While most neighbourhoods saw positive growth, some of the strongest net worth gains occurred in Bayview Village, North York and the up-and-coming areas just east of the downtown core. By contrast, a few smaller areas saw a decline in net worth, including Wilson Heights, The Annex and some condo-filled communities close to the lakefront.
Vancouver households attained an average net worth of $867,817 in 2014, the highest in the country. Largely due to increases in real estate values, the net worth growth rate of 8.8 percent over 2013 was also the highest among Canada’s major metropolitan centres. Overall, the city experienced growth in areas across the city, with some of its sharpest increases occurring in areas like Pitt Meadows and North Vancouver. However, there were declines in downtown’s West End and portions of northern Surrey.
5. The Rich Got Richer. The three wealthiest provinces at the end of 2013 retained their top status at the end of 2014 and their net worth grew the most of all provinces: Top-ranked British Columbia grew 7.5 percent to $748,919, second-place Alberta rose 7.3 percent to $701,003 and third-place Ontario grew 6.7 percent to $681,600. Yet the data indicate different drivers behind these rising fortunes. B.C. remains the wealthiest in large part because its real estate values are much higher than the rest of Canada: $504,714 compared to Alberta’s $428,671 and Ontario’s $420,356. Albertans’ net worth rose largely due to stock market appreciation. But in Ontario, where households tend to be more conservative with their liquid assets, residents withdrew less and speculated less than in Alberta and saw strong growth in pensions.
6. Where the Savers Are. Households in most provinces drew down their liquid assets in 2014—an average $2,901 per household nationwide—but not in British Columbia and Newfoundland and Labrador. Households in B.C. socked away the most last year—$3,705 per household—while those in Newfoundland and Labrador had net savings of $1,075. In B.C., much of the savings appeared concentrated in Vancouver, where pricey real estate requires significant down payments and has discouraged many households from investing in real estate. In Newfoundland and Labrador, residents had a strong economic year thanks to the booming mining, oil and gas sector, and saw average household incomes rise 4.7 percent—twice the national average. “In 2014, Newfoundland and Labrador was firing on all cylinders,” says Miron. “And residents chose to squirrel away a lot of that newfound money into savings.”
7. Alberta’s Got the (Spending) Power. Although Alberta’s economy has been rocked by the drop in oil prices that began in the fourth quarter of 2014, this economic volatility had not yet significantly affected household finances during the year. Alberta’s average household income of $116,530 is 25 percent higher than Ontario’s $93,183. Even more impressive, Alberta residents have the most spending power, or discretionary income—$57,219, which is 24 percent more than second-ranked Saskatchewan ($46,100). However, in an early indicator of potential economic turmoil, Alberta’s households withdrew $3,612 from their savings in 2014.
8. Slowing Down in the Prairies. In recent years, the Prairie provinces of Saskatchewan and Manitoba were considered economic stars, thanks to the boom in oil and other natural resources in Saskatchewan and a generally steady economy in Manitoba. Migrants came and stayed for the long haul, investing in real estate. But in 2014, both provinces seemed to run out of steam. They’re not declining in terms of net worth; they’re just not growing, comparatively speaking. Net worth increases in Manitoba and Saskatchewan came in at a subpar 4.3 percent and 5.1 percent, respectively.
9. Bought Low, Sold High. Nationwide, liquid assets (defined as the sum of savings and investments) were up 5.5 percent in 2014, due in part to strong stock market returns. Although data suggest that Canadians are selling off some of their investments (stocks, bonds, mutual funds and segregated funds), the total value of their holdings rose 7.8 percent because of appreciating market values.
10. Keeping an Eye on Debt. With credit card debt rising only 0.3 percent in 2014—much lower than the 1.5 percent rate of inflation—Canadians seemed to be kicking their plastic habit. They were similarly reluctant to draw on lines of credit; those balances declined by 1.1 percent. However, personal loans, which include auto loans, student loans and debt consolidation, increased by 5.2 percent. The growth in installment debt appears to have come at the expense of revolving credit and could be seen in a positive light as Canadian households seek to lock in current low interest rates.
11. Pensions Are Up. Growth in Canadians’ net worth is being driven by increases in employer pension plans (EPPs), up 7.2 percent from 2013—the fastest growing asset class. The combination of defined benefit employer pension plans, increasing life expectancies and declining long-term interest rates fueled this growth. And although the number of people contributing to pension plans is declining, the share of Canadian households that are entitled to one or more EPPs increased slightly from 53.7 percent to 54.0 percent in 2014.
12. Gains at the Bottom, Weakness at the Top. When EA analysts examined Canadians’ net worth by quintiles, they found that the top three quintiles experienced below-average growth in their net worth of just 5.6 percent, less than the 6.1 percent national average. However, the net worth of the lowest net worth quintile grew by 9.3 percent—the most of all quintiles—as the value of their real estate and liquid assets grew rapidly. In particular, the bottom two quintiles were both actively saving this past year, squirreling away $3,307 and $2,073 respectively. At the other end, the top quintile’s net worth rose only 5.6 percent as wealthier Canadians were drawing from their savings—on average $16,638 per household in 2014, the equivalent of undertaking a home renovation or trading up for a fancier automobile. “It’s as if the residents of the top quintile just went on a luxury cruise,” says Miron. “Or rather than buying a $40,000 car, last year they splurged on a $56,000 car.”
What’s Next. While 2014 checked in as an up year overall, the serious economic headwinds that are affecting the Canadian economy in 2015 have not yet spread to Canadian household balance sheets. As of the end of the first quarter of 2015, real estate values and debt were similar to 2014 values, meaning there has been little change up or down. And while first-quarter 2015 data indicate liquid asset holdings are higher compared to last year, it is expected that stock market declines in the second quarter will temper this trend. As Peter Miron observes, “Our financial state of affairs is pretty good, but we are always dealing with a snapshot in time. With WealthScapes 2015 we can understand where we stand and then plan accordingly.”
Maps based on WealthScapes 2015 are available from Julia Vasilev, marketing manager of Environics Analytics, at 416.969.2733 or email@example.com.
About Environics Analytics
The premier marketing and analytical services company in Canada, Environics Analytics helps customers turn data and analytics into insight, strategy and engagement. EA offers the full range of analytical services—from data supplier to strategic consultancy—and provides over-the-counter reports, purpose-built software-as-a-service and a wide variety of modelling approaches. Its team of quantitative marketers, modellers and geographers are expert at helping organizations identify their business challenges, develop data-driven solutions and achieve success along every phase of their analytics journey. EA is a member of the Environics group, a unique alliance of companies dedicated to providing intelligent research, analytics and communications.