How valuable will Canadian households' pandemic savings be?

Savings will be a valuable boost to spending, but they might not be nearly enough for down payments on home purchases

How valuable will Canadian households' pandemic savings be?

The federal government is counting on Canadians’ pent-up savings during the pandemic to drive economic activity, particularly housing sales, in the near future – but real estate information portal Better Dwelling has argued that this potential is overstated.

Data from Statistics Canada showed that, overall, households saved an extra $167 billion last year.

However, the figure sounds a lot larger than it actually is on a per capita basis, as the average net savings per household was $13,546 during the pandemic year.

“It’s quite a bit of money, considering households saved an average of less than $2,000 the year before … [but] it doesn’t quite have the same ring as households saving $167 billion, though,” Better Dwelling said in a recent analysis. “It’s definitely going to provide a boost to spending. However, everyone didn’t get a down payment-sized windfall like many assume.”

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Households led by people in the 35-44 age range saved the most in 2020, with an average of $30,375.

Older households in the 45-54 cohort also built up formidable savings, with an average of $29,325 during the pandemic. Better Dwelling noted that “this demographic is more likely to already own a home but might be looking for an upgrade.”

The next group (55-64 years old) saved $14,225 in 2020, and “is very likely to own their home.” In stark contrast, Canadian seniors are spending “a lifetime of savings,” with the average senior-led household spending $11,053 of their savings in 2020.

“There are a lot of expectations for these pent-up savings, which sound huge,” Better Dwelling said. “The real estate industry expects it to fuel down payments. Economists see it as boosting household consumption. In reality, when averaged, it’s just a few months of income these households saved.”