Housing gains have Canadians saving less: CIBC

Much of this buying spree has been inspired by a real estate boom in Canada, said the Canadian Imperial Bank of Commerce report, authored by Deputy Chief Economist Benjamin Tal.

Canada’s savings rate is now 4.2%, below the U.S. rate of 5.8%, the largest gap on record. Canadians used to save more than their neighbors to the south, but that’s changed in the past couple of years as the housing markets have gone in opposite directions.

“With the average house price in Canada more than doubling since 1997, many households have been saving indirectly or passively via the increase in their home equity, and thus felt less pressured to save from their current income,” said Tal in his report.

Unlike stock market gains, gains in housing equity feel secure to owners, he said, thus eliminating the urge to save. That will change if housing prices stop rising, however.

“While we do not see a major correction, the projected flat housing market will strip households of their primary means of passive savings,” said Tal. “And as is currently the case in the U.S., this process will bring back old-fashioned active savings by way of actually putting money aside.”

But Tal said it doesn’t take much to return the savings rate to 6% in Canada. Achieving that would take just a 10% cut in the annual average of $11,000 spent individually in Canada on clothing, personal care, recreation, games of chance, tobacco, and alcohol.

Are you looking to invest in property? If you like, we can get one of our mortgage experts to tell you exactly how much you can afford to borrow, which is the best mortgage for you or how much they could save you right now if you have an existing mortgage. Click here to get help choosing the best mortgage rate

COMMENTS

Get help choosing the best mortgage rate

Just fill in a few details, and we'll arrange for a Mortgage adviser to help you find the best mortgage for your needs

  • How soon do you want a mortgage?
  • Name
  • Where do you live?
  • Phone number
  • E-mail address

Industry news

Submit a press release

Poll

Should government update pot rules to prohibit growing in rentals?