Canada’s Growing Wealth Divide: Why Homeowners Have 30 Times Net Worth of Renters
In Canada, a stark financial divide exists between homeowners and renters, a trend highlighted by the StatCan Survey of Financial Security. The data shows that the median net worth of Canadian homeowners far outstrips that of renters, often by a factor of ten or more. This disparity underscores the role of homeownership as a significant contributor to wealth accumulation, especially when real estate values soar. The survey reflects why many Canadians consider owning a home the most reliable route to building financial security, even as rising home prices push this goal further from reach for many.
Key Takeaways
Wealth Differences by Age Cohort
The wealth gap between Canadian homeowners and renters becomes significantly more pronounced with age. For those under 35, homeowners have a median net worth of $457,100, while renters have just $44,000. This disparity escalates in older groups: among Canadians aged 55 to 64, homeowners report a median net worth of $1,241,800—almost 30 times the $43,000 median for renters. For those 65 and older, homeowners have a median net worth of $1,081,000 compared to just $72,000 for renters. These gaps largely stem from rising real estate values, considerably boosting homeowner wealth.
Homeownership as a Wealth Vehicle
Homeownership has become a primary means of accumulating wealth, with a median net worth advantage even over employer-sponsored pension plans. Canadians who own a principal residence without a pension plan report a median net worth of $914,000, compared to $359,000 for those who rent but have a pension. These figures highlight how owning property exceeds the wealth-building potential of traditional retirement savings for Canadians.
The Impact of Soaring Home Prices
Real estate values have skyrocketed in Canada, especially in Toronto and Vancouver, where the average home price has now surpassed $1 million. Nationally, home prices increased by 30% in the past five years and 64% over the last decade. This growth has raised net worth for homeowners of all ages, with young homeowners seeing the most significant percentage gains. However, this price growth has also made homeownership less attainable, reducing the homeownership rate.
Government Initiatives and Market Challenges
The Canadian government is implementing measures to tackle the housing crisis. These efforts include tax incentives and lower-interest loans to motivate developers to construct more rental properties. Furthermore, the government is limiting immigration and the arrival of temporary residents to help reduce housing demand, though the long-term impact of this approach remains uncertain.
Tax Cuts and Loans
The government has introduced financial relief and low-cost borrowing options for builders to address Canada’s rental housing shortage and affordability concerns. With changes in immigration targets and predictions of a smaller population increase, the impact on high-demand urban housing markets may be significant, mainly where growth has depended on a steady inflow of residents. Experts remain cautiously hopeful for the Canadian housing market’s prospects in the coming year, though expectations have become more conservative for the following years. These financial incentives aim to drive more rental developments, potentially easing the pressures pushing housing costs up for Canadians.
This approach aligns with broader economic adjustments affecting residential loans and rental investments. As the demand for rental housing may lessen, some experts anticipate more units will be available in urban areas where rental pressure has been high. Policymakers must continue supporting builders with financial benefits to encourage ongoing construction, aiming to create a more accessible housing market. This dual approach—reducing reliance on population growth while ensuring continued development—signals a commitment to balanced, stable growth in Canada’s housing sector.
Immigration Reductions
The Canadian government’s recent move to limit immigration levels and reduce the number of temporary residents aims to manage housing demand, though the lasting impact is still unclear. With slower population growth anticipated—a projected 0.2% decrease over the next two years—the shift seeks to alleviate pressure on housing markets, particularly in major urban areas where high demand has driven up prices. The anticipated drop of approximately 900,000 temporary residents alone could significantly impact the rental market, reducing the need for compact, high-rise units in densely populated cities. However, some economic analysts suggest that these targets may not fully materialize, with population growth potentially remaining steady. While this shift may help ease the competitive housing environment, the broader economic and market implications will largely depend on how effectively the new policies are implemented.
This population adjustment could reduce housing demand, but Canada’s real estate market remains complex and variable. Lower immigration levels may reduce incentives for new housing development, limiting overall supply. Different regions may experience unique effects, with urban centres facing specific challenges related to reduced demand. As immigration policies evolve, housing price trends may adjust in areas that have relied on new arrivals for demand. That said, future policy adjustments may increase immigration numbers if economic conditions require it, while anticipated rate cuts from the Bank of Canada could encourage housing investment. Ultimately, although these new immigration measures could temper housing market price pressures, they’re unlikely to bring about drastic long-term changes in Canada’s housing sector without a marked increase in housing supply.
Young Canadians Hold on to Homeownership Dreams Despite Challenges
Despite these efforts, many young Canadians are still optimistic about owning a home. According to Scotiabank’s 2024 housing poll, the recent decrease in interest rates has not eased financial pressures for many young Canadians, with 56% of Millennials and Gen Z feeling a negative economic impact that has led some to delay home-buying plans. Affordability concerns are rising among older Canadians, while the concerns of the 18-34 age group have held steady. Although homeownership has declined in this younger group, their long-term goal to buy a home remains firm.
Mortgage renewals are a significant concern, especially among younger homeowners. Nearly 72% of Gen Z and 48% of Millennials are renewing for the first time, compared to 14% of Gen X and 10% of Boomers. Despite interest rate cuts, 68% of Canadians still prioritize competitively lower mortgage rates, with 37% of Gen Z and 31% of Millennials moving up homebuying plans due to financial improvements, outpacing Gen X (15%) and Boomers (10%).
Gen Z shows a high preference (35%) for completing mortgage applications online, unlike Boomers (5%). Furthermore, 63% of Gen Z and 54% of Millennials seek more straightforward and accessible homebuying guidance from financial institutions, with 27% of younger generations lacking confidence in the homebuying process, compared to 15% of Boomers.
Limitations of the Survey and Wealth Concentration
According to thought leadership from RBC Economist Carrie Freestone, Canada’s economic landscape sharply contrasts high- and low-income households. While household savings have reached record levels, many lower- and middle-income Canadians feel the strain of rising costs and limited purchasing power. High-income earners have been able to continue building wealth, while lower-income households are increasingly relying on debt and essential services, such as food banks, to make ends meet. Canadians in the lowest 20% income bracket now spend 105% of their disposable income on necessities like housing, utilities, and food. The top 20% of income earners save nearly one-third of their take-home pay every quarter. This top group alone accounts for 60% of financial asset growth since 2019, benefitting from higher returns on term deposits, even as rising interest rates, inflation, and unemployment take a toll on the purchasing power of lower-income groups.
Middle-income households are also feeling the squeeze, with those in the 40%-60% income range devoting the highest share of their income to essentials since 1999 and spending 17% more than they earn—a stark increase from the 9% “dis-savings” rate in 2019. Essentials have become significantly costlier, with grocery prices up 25% and gasoline up 33% since before the pandemic. Low-income earners are further impacted by rising unemployment and slower wage growth, with the top 40% of earners capturing 70% of wage growth over the past three years. RBC’s findings highlight the challenges the Bank of Canada faces in managing inflation, where rate hikes boost investment returns for high-income earners but put added pressure on lower-income Canadians already struggling with basic costs.
While StatsCan’s survey offers insights into household wealth, it falls short of capturing the full scope of wealth concentration, especially among Canada’s wealthiest families. The survey groups the top 5% of Canadians without distinguishing the top 1%, potentially underestimating wealth inequality.?
Final Thoughts
The disparity in wealth between Canadian homeowners and renters is a growing concern, driven by soaring home prices and financial security tied to homeownership. While the government’s policies aim to make housing more affordable, challenges remain. For Canadians striving to achieve financial security, understanding the nuances of homeownership and navigating Canada’s real estate market and mortgage rates may offer a viable path forward.
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