The rich get richer, and the poor wonder
Most wealth is held by relatively few households in Canada. The bottom 40% of the population, where most immigrants fall, control only 2.7% of the country’s wealth, while the richest (top 20%) accounted for almost 70% of net worth in the first quarter of 2023.
The gap in net worth between the most and least wealthy increased by 1.1 percentage points in the first quarter of 2023 relative to the same quarter a year earlier. This was the fastest increase on record for these estimates, which date back to 2010.
In contrast, the wealth gap declined by 1.6 percentage points over the two-year period from the first quarter of 2020 to the first quarter of 2022. Despite recent increases in the wealth gap, it remained lower in the first quarter of 2023 (65.1 percentage points) relative to the first quarter of 2020 (65.6 percentage points).
The least wealthy were affected more by recent economic pressures, as they decreased their net worth by 13.8% in the first quarter of 2023 relative to the same quarter a year earlier. This reduction represented more than triple the rate of decrease for the wealthiest (-3.8%).
Younger households get hardest hit
The least wealthy households tend to be younger than average. While households aged less than 45 years accounted for 36.2% of all households, they represented 55.2% of those in the lowest two wealth quintiles.
Younger households have also recently increased their share of the total population, as they accounted for 47.3% of all growth since the third quarter of 2021.
Recent growth in the number of younger households has occurred along with increases in immigration. According to demographic studies, record-high population growth in the year 2022 was driven almost entirely (95.9%) by immigration, and recent immigrants are younger than the general population.
The reduction in net worth for all households in the first quarter relative to the same quarter a year earlier was due almost entirely to real estate (92.1%). The average value of real estate held by households declined by 8.6% in the first quarter relative to the same quarter a year earlier.
According to data on home sale prices, the national average price for a residential home reached $686,000 at the end of the first quarter, down 13.7% from the first quarter of 2022.
Although the least wealthy held and acquired real estate, their average net worth declined in the first quarter relative to a year earlier as the increase in mortgage debt to finance those assets (+23.8%) outweighed the increase in the average value of their real estate holdings (+6.2%).
The least wealthy also increased their non-mortgage debt by 4.6% over the same period.
Average net worth decreased the most for households aged less than 35 years, down 8.7% in the first quarter of 2023 relative to the same quarter a year earlier, compared with a decrease of 1.8% for households aged 55 to 64 years.
Younger households tend to be more susceptible to reductions in real estate values, as they derive more of their net worth from that asset category, while older households have had more time over their life cycle to diversify their asset portfolio.
In the first quarter, real estate accounted for 88.3% of wealth for households aged less than 35 years, compared with 40.1% for households aged 65 years and older