Canadian household wealth dropped by ~$900 billion in Q2 of this year, which, as the largest quarterly drop seen on record, is kind of a big deal.
Catch-up: The pandemic did for Canadian net worths what spinach did for Popeye’s muscles, especially for homeowners who reaped the rewards of a real estate bonanza.
- Canadians added ~$3.9 trillion in wealth between 2019 and 2022 (most of which they’ve held onto, we’d add) as the average value of a home skyrocketed by 52%.
Driving the news: Now the party’s over as the great quantitative tightener Tiff Macklem continues to crush housing prices with interest rate hikes (which are due to keep on goin’).
- Oxford Economics recently awarded Canada (alongside Sweden and New Zealand) “Most Likely to… Experience A Housing Crash,” with over 50% certainty.
By year’s end, wealth levels will have fallen by $1.1 trillion from pandemic highs, creating a so-called ‘negative wealth effect’ that will help pull down household spending by ~$15 billion next year.
Why it matters: RBC Economics didn’t mince words in its interpretation of the data: “This is one of the factors that will drive Canada into a recession early next year.” Yikes.