$174,300 is what the average Canadian is worth says StatsCan

The net worth of Canadians – what they own, less what they owe – rose by $111 billion, or two per cent, in the spring to $174,300 for every man, woman and child, Statistics Canada reports.

But with the plunge in the stock market and the fall in home prices since the spring, we’re probably worth less today, according to one bank analyst.

National wealth, which is the sum of economywide non-financial assets, rose 2.7 per cent $5.9 trillion, with residential real estate accounting for about half of the gain in national wealth, it said. There was also a substantial improvement in savings for the corporate sector, resulting from significant price driven growth in profits, particularly for energy products.

Canada’s net foreign indebtedness, however, also increased during the second quarter, dampening the gain in net worth as the growth in Canadian liabilities to non-residents – particularly net new Canadian bond issues – exceeded growth in Canadian assets abroad.

A breakdown of the increase in net worth shows that household net worth rose 2.8 per cent, following a 0.5 per cent gain in the first quarter, with gains in the market value of equities being the largest contributor to the advance, followed by increases in the value of residential real estate holdings. Household debt held steady at 19.6 cents for every dollar of net worth and at $1.25 for every dollar of personal disposable income.

However, National Bank of Canada economist Stefane Marion said that the 15-per-cent plunge in the stock market from a record high at the end of the quarter, plus the slump in housing prices, will have put a dent in households’ balance sheets.

“In light of the correction in the stock market and the lack of home price appreciation this quarter, we estimate that the ratio (of debt to net worth) has increased by more than half a cent so far in the third quarter,” Marion said, adding that while the leverage of Canadian households is still significantly less than that of their U.S. counterparts, it is nonetheless the highest in over 18 years.

Statistics Canada said an increase during the spring quarter in the value of non-financial assets, especially the market value of equities and real estate holdings of households, and in the increase in corporate profits, especially in the resources sector, more than offset an increase in Canadians’ net foreign indebtedness.

The ratio of corporate debt to equity continued what for most of the last two decades has been a downward trend to hit 52.7 cents of debt for every dollar of equity.

Marion did not do an analysis of the expected impact on corporate balance sheets of the commodity price correction, but said in an interview that it would likely have a net negative impact on corporate profitability, and in turn overall net worth.

“But remember the balance sheets of corporations are in much better than they were in the 1990s,” he noted.

Meanwhile, the net financial position of the government sector in the second quarter also continued to improve as the ratio of government net debt to gross domestic product edged lower to just over one-third of GDP, down considerably from more than 90 per cent in the mid-1990s.

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