Young Canadians avoid home buying, see wealth fall for first time since pandemic started: StatCan

Recent data from Statistics Canada show the youngest households in Canada saw their wealth decrease for the first time since the pandemic began as they avoided home purchases and reduced their financial assets.

The report shows that the average wealth of the youngest age group, in which the main income earner is younger than 35, dropped by 1.4 per cent in the fourth quarter of 2021.

Meanwhile, those aged 35 and older who make the highest income in their household increased their wealth by 0.8 per cent on average, with the country's least wealthy households, or those in the lowest two wealth quintiles, also increasing their average net worth at a faster pace than the wealthiest ones.

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Mortgage debt, non-mortgage debt and financial assets contributed three, 4.7 and 0.8 per cent respectively to the net worth of the least wealthy households, while real estate and consumer goods led to four and 0.7 per cent decreases.

Real estate values saw little change in the fourth quarter of 2021 for the youngest age group, which StatCan said is due to younger Canadians avoiding home purchases.

The same age group also reduced its average debt by 2.8 per cent, more than any other group.

However, the value of their non-pension financial assets, including cash held in savings accounts, mutual funds and other investments, dropped by 3.3 per cent.

HIGH COSTS DISSUADE YOUNGER CANADIANS FROM BUYING

The report comes as more young Canadians report putting off buying homes amid record-high housing prices.

A poll released last week from Scotiabank found 43 per cent of Canadians are putting their home-buying plans on hold, compared to 33 per cent in 2021 and 20 per cent in 2020.

An even greater share of young Canadians appear to be concerned about the housing market overall. Based on the survey, 56 per cent of Canadians between the ages 18 and 34 said the current economic environment made them halt plans to buy a house, while 62 per cent said they were waiting for prices to fall.

Mortgage experts also say they are seeing more relatives gifting down payments to family members to help cover the initial costs of buying a home.

In November, IG Private Wealth Management reported that the country's most affluent families would give $145,000 on average to each of their children to help with the purchase of their first home.

FEDERAL BUDGET AND HOUSING

In an effort to address challenges around housing affordability, the Liberal government, with the support of the NDP, will look to pass its recently released budget, which pledges an estimated $10 billion over five years on various housing initiatives.

The federal government will attempt to double the number of homes built each year over the next decade to about 400,000 in order to meet the 3.5 million it estimates is needed by 2031 to meet demand.

Housing prices have climbed more than 20 per cent since last year to a record $816,720 in February.

The federal government also will ban foreign buyers from purchasing homes in Canada for the next two years, with certain exemptions.

However, real estate experts have expressed mixed feelings on how effective these measures will be. Foreign buyers currently make up less than two per cent of the B.C. market, for example, provincial Housing Minister David Eby said.

The Liberals also will introduce a new Tax-Free First Home Savings Account, which Canadians under the age of 40 can use to set aside up to $40,000 as early as 2023 for the purchase of their first home.

The federal government also plans to double the First-Time Home Buyer's Tax Credit to $10,000 and extend the First-Time Home Buyer Incentive used to help reduce monthly mortgage payments.

"We will make it easier for our young people to get those first keys of their own," federal Finance Minister Chrystia Freeland said.

WEALTH GAP DECLINES

Another notable trend in the recent StatCan analysis is the declining wealth gap between the wealthiest and least wealthy households in Canada.

During the pandemic, the difference in the share of net worth between the two groups fell at the fastest pace on record, the federal agency says, dropping by 1.7 percentage points compared to the end of 2019, matching the sum total of all reductions in the 10 years prior to that.

StatCan said Canada's least wealthy households increased their net worth by paying down mortgages and other debt, rather than acquiring real estate or non-financial assets such as cars and appliances.

All households, however, increased their debt-to-income ratios, a metric used to determine a household's ability to service debt, which moved closer to pre-pandemic rates.

StatCan saw notable increases in the 45 to 54 or middle-age group (9.3 percentage points) and seniors, or those aged 65 and older (8.4 percentage points).

The debt-to-asset ratio, which can indicate a household's degree of financial vulnerability, remained stable through 2021 across all groups.

With files from CTV News and The Canadian Press