The economic crisis caused by COVID-19 was like no other. Most Quebecers have come out richer than they came in, at least until now.
You talk about a recession! Individuals’ net worth increased in 2020 for all income brackets, all age groups, all employment statuses and all regions in Quebec, a brief analysis by Desjardins Group reported Thursday.
This enrichment, as the economy shrank by 5.5%, was the result of a set of factors often linked to the particular nature of the crisis. Prevented from consuming as usual, and even confined to their homes, Quebecers saw the funds in their checking accounts jump by 60% and were able to repay their credit card balances and their line of credit. The 30% of employees who were teleworked between April 2020 and June 2021 found themselves “to maintain the same level of income, while greatly reducing their expenses related to work, transport, leisure and travel.”
Some also took the opportunity to invest in the stock market, the value of their average portfolio, according to Ipsos, appreciating by 65% while the return of the Canadian stock index did not reach 6% last year. And then, those who had a home took advantage of the sharp increase in its value, with the average net worth of homeowners suddenly rising from $ 373,000 to $ 428,000. Renters also got richer, albeit much less, with their average net worth dropping from $ 27,000 to $ 40,000.
There were other factors. The enhancement of social programs and the creation of special financial assistance measures, such as the Canada Emergency Benefit (CEP), have come to the aid of those who have been most directly affected by the crisis to the point, at times, of being by improving their income, recall in their analysis the economists of the Desjardins Group Hélène Bégin and Lorenzo Tessier-Moreau. In fact, it is the unemployed and unemployed workers who saw their average personal incomes increase the most, proportionately, in 2020.
The net worth of Quebecers thus appreciated in all income brackets, including those who earned less than $ 30,000 that year (+ 16%), in all age groups – although more modestly among those under 29, more likely to go into debt to buy their first home – as well as in all regions, although proportionately a little more in the greater Montreal area as well as in small communities under 10 000 inhabitants who took advantage of the enthusiasm of buyers for second homes and houses in the countryside.
Shortness of breath
Most of these trends have continued this year, but with less intensity. “Even though income growth has slowed and the savings rate has declined compared to the first year of the pandemic, the growth in the value of financial and real estate assets continued in 2021”, at the rate of a 15% rise in stock market indices and 12.5% in property prices during the first three quarters only.
The rise in prices is making potential home buyers more and more hesitant, according to a vast survey of the Quebec real estate sector unveiled on Thursday. The proportion of Quebec households who plan to acquire a property in the next five years has therefore retreated slightly this year. It went from 23% to 25% in the general population, but from 52% to 47% among young people between 18 and 34 years old. If the prices come to slow down the purchasing ambitions of almost two-thirds of the latter, a little less than half think of the telework that they will be able to do there. According to 40% of its followers, it would save between one and two hours of daily transport and save between $ 100 and $ 200 per month (28%), or even more (13%).
Meanwhile, the size of mortgages as a proportion of household income continues to increase, notes the Bank of Canada. “By the end of 2021, the share of heavily indebted households will likely surpass its 2019 peak, undoing all the progress made at the start of the pandemic, and beyond,” observed one of its deputy governors, Paul. Beaudry, during a speech ten days ago. And while consumer debt remains below its pre-pandemic level, it hasn’t stopped rising throughout the year, Equifax reported the same day.
Watch out for the turn!
However, it is now necessary to take into account the effect of the rise in inflation on the real value of one’s savings, recalls Desjardins. Not to mention the fact that 2022 will likely bring the Bank of Canada’s first interest rate hikes.
It is not only the mitigation of the effects of the pandemic and the economic recovery that could lead the Bank of Canada to raise its rates in the coming years, warned Paul Beaudry. The low inflation of the past 20 years has also been the result of a combination of factors, including globalization and China’s entry into the world economy, which could “reverse”, forcing central banks to back down. intervene more heavily to prevent a surge in prices.
“If one of these eventualities were to materialize, heavily indebted households would be in trouble. “