Canadian Household Balance Sheet (2024 Q2)

Household wealth rises for the third consecutive quarter

• Canadian household net worth (the value of assets less liabilities) gained another $42.4 billion or 0.2% quarter-on-quarter (q/q) to $17.0 trillion in the second quarter of 2024. This is slower than the previous quarter's gain of 3.6% (or $588.9 billion). 
• Financial assets rose by 0.9% q/q on the back of solid equity market gains, setting a new record high of $10.1 billion. Gains in the U.S. equity market were partially offset by losses in Canada. 
• The value of residential real estate edged down 0.1% q/q, as real estate activity reported the weakest second quarter in four years. 
• Growth in household liabilities accelerated to 1.5% q/q, gaining $45.4 billion on the quarter -  the largest increase since the third quarter of 2022.
• However, income growth continued outpacing the growth in debt, pushing the household debt-to-income ratio down to 175.5%. This represents the fifth consecutive quarterly decline in the ratio, putting it at its lowest level since Q1-2021. 
• The debt service ratio - total household debt payments relative to personal disposable income – rose slightly to a level just shy of 15.0% and roughly in line with the peak reached exactly one year ago.

Key Implications

• Despite an acceleration in liabilities growth and a decline in real estate assets, Canadian households' wealth eked out another quarter of gains thanks to solid growth in U.S. equities and a solid contribution from savings in deposits as gains in disposable income outweighed increases in nominal consumption expenditure.
• Looking ahead in Q3, it appears households should see further gains on the asset side of their balance sheets with equity markets on both sides of the border in the black, and house prices rising. As for liabilities, lower rates are likely to gradually reignite borrowing activity—potentially putting downward pressure on net worth— but we don’t expect a meaningful rebound in borrowing until late 2024 or early 2025. For Q3 2024, we anticipate moderate gains in household wealth, offering marginal support to consumer spending.

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