What will shape future home purchasing power?

A significant chunk of Canadian households were not able to save during the pandemic

What will shape future home purchasing power?

Canada’s future home purchasing power will likely be concentrated on the nation’s highest-earning households, if the latest data on savings is any indication.

This is largely because the bottom fifth of Canadian households weren’t actually able to save during the pandemic year. This cohort had a net savings rate of -61.4% (-$60.35 billion) in 2020, according to Statistics Canada.

While substantially better than the -114% (-$90.14 billion) level in 2019, these households are still essentially insolvent.

“Rising government transfers, which were double the size of income lost, only helped to offset some of the debt,” Better Dwelling said in its analysis of the Statistics Canada figures.

The next lowest fifth of households had a net savings rate of -3.7% (-$6.88 billion) in 2020, a considerable improvement from -28.0% (-$45.02 billion) the year prior.

“However, the country would need to be in perpetual lockdown for this to last,” Better Dwelling said. “Otherwise, this demographic is likely to fall back to pre-pandemic levels of savings.”

Read more: Significant risks with post-pandemic “revenge spending”

Canada’s middle class moved from net borrowing to net saving during the pandemic, with a household savings rate of 9.1% ($22.97 billion) in 2020 – much better than the -6.9% (-$15.63 billion) in 2019.

The greatest savings were seen in the upper two-fifths of Canadian households, which had the advantage of larger financial buffers to begin with. The second wealthiest segment nearly doubled its savings rate to 19.6% ($66.06 billion), while the highest earning households posted a savings rate of had 33.1% ($186.61 billion) in 2020.

“One in four dollars earned by these households was savings before the pandemic. During the pandemic, these households represented 89.54% of all savings,” Better Dwelling said.