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According to the latest data released by Statistics Canada, the net worth of Canadian households fell by nearly 1 trillion Canadian dollars (equivalent to 5.3 trillion yuan) in the second quarter of this year due to the sharp fall in Canadian house prices.
In terms of household assets, the value of residential real estate held by Canadian households decreased by $323 billion in the second quarter, while financial assets decreased by $409 billion.
In response, Statistics Canada said it was the biggest decline since at least 1990 and even exceeded the 5 per cent decline during the global subprime crisis in the third quarter of 2008.
At the same time, the data also showed that Canadian household credit market debt as a share of disposable income rose from 179.7% in the first quarter to 181.7% in the second quarter.
As mentioned above, the sharp decrease in the net worth of Canadian households is mainly due to the impairment of Canadian real estate, so what is the current Canadian real estate market?
Wang Ye said that Finance and Economics has noticed that Canadian real estate has been soaring since 2018, which has also attracted a large number of overseas buyers, but in 2022, this situation has changed, and Canadian house prices have fallen sharply. and the key factor is the Bank of Canada policy change!
In this regard, the Royal Bank of Canada (RBC) issued the most serious real estate bear market warning: Canada’s house price correction is the deepest in half a century!
As the Bank of Canada raised interest rates, the Canadian real estate market began to decline, and real estate is crucial to Canadian household assets.
Just last week, for example, the Bank of Canada raised interest rates by 75 basis points to 3.25% in an attempt to cool red-hot inflation, which has risen to its highest level in a decade, as shown in the following chart:
In fact, Wang Yeh said that Finance and Economics has noticed that since March this year, the Bank of Canada has continuously raised interest rates to cope with persistent inflation. specifically, it announced an interest rate increase of 25 basis points in March, raised the benchmark interest rate to 1.5% after announcing a 50 basis point increase in April and June, and directly raised the benchmark interest rate by 100 basis points to 2.5% in July.
Finally, Statistics Canada said the impairment in the Canadian real estate market, which is a drag on net worth, is likely to continue into the second half of this year.
To make matters worse, house prices in Canada are still falling and borrowing costs are expected to rise further as the Bank of Canada is likely to continue to raise interest rates because of market forecasts that in October, the Bank of Canada may raise interest rates by another 50 basis points.