The youngest Canadian households saw their wealth decrease for the first time since the start of the COVID-19 pandemic, prompting them to avoid home purchases and reduce financial assets, Statistics Canada says.
Real estate values, in fact, saw little change for the youngest age group in the fourth quarter as they avoided buying homes. Those in this age group also reduced their average debt by 2.8 percent during that period—more than any other age group. The value of their non-pension financial assets, including cash held in savings accounts, mutual funds, and other investments, also decreased by 3.3 percent.
The survey found 43 percent of Canadians are putting their home purchase plans on hold in 2022, compared to 33 percent in 2021 and 20 percent in 2020.
Most millennials are discouraged about homeownership as they grow increasingly concerned about costs of living, rising interest rates, market instability, and economic uncertainty, with 56 percent saying the adverse economic environment is halting their plans to buy a home. Ninety percent say they believe housing prices will continue to rise over the next 12 months, and 62 percent say they are waiting for housing prices to fall before buying a home.
To meet the challenges of housing affordability, the federal government has pledged a roughly $10 billion housing plan over five years in its recent budget.
In a series of housing initiatives, the government says it will double the number of homes built each year for the next decade to roughly 400,000 to meet the demand for 3.5 million homes by 2031.
In its study of the economic well-being of Canadians, Statistics Canada also looked at the indicator of debt-to-income ratio, which reflects the degree to which households are able to service their debt at a given point in time. A reduction in the debt-to-income ratio means that households are more capable of managing their ongoing debt payments, and may be able to absorb additional debt-servicing costs in the future.
However, the report found that the debt-to-income ratio moved closer to pre-pandemic levels for most households in the fourth quarter of 2021, with especially high increases for the middle-aged group (+9.3 percent for those aged 45 to 54) and seniors (+8.4 percent for those aged 65 years and older).
While debt remained stable for seniors, the growth in debt has outpaced income for the middle-aged group, with mortgage debt being the primary source of debt increases.