Wednesday, September 14, 2011
Toronto's wealthiest are the most indebted
And the households carrying the largest debt are in Toronto’s toniest neighbourhoods, including the Bridle Path, Rosedale, Leaside and The Beach, where single-family homes are pushing past the $1-million mark.
“There’s always the question of how much is this wealth the illusion of wealth? The fact that these people live in expensive houses doesn’t necessarily mean that they are debt-free, said Peter Miron, senior research analyst for Environics Analytics.
Environics Analytics crunched numbers from surveys of financial behaviour and data from the The Bank of Canada, Statistics Canada and the Canada Revenue Agency, among others, to get at neighbourhood and Census Metropolitan Area (CMA) data.
Even once mortgages are taken out of the equation, residents of the Bridle Path, Rosedale and The Beach have higher levels of debt than households along the Danforth. In part, this reflects their ability to carry higher levels of debt because they earn more money.
But that kind of lifestyle can topple quickly in a financial downturn.
“If you’re expecting your $150,000 bonus to cover interest on the $3-million mansion, it’s a rude awakening when the markets fall,” says Morin.
He says 2008 and the summer of 2009 saw slowed growth in real estate values in areas like Rosedale as compared to the rest of the city.
Net worth in the CMA grew 9.6 per cent to $553,896 between 2007 and 2010, with Liberty Village, downtown Toronto along the Gardiner Expressway, and Vaughan recording the strongest growth.
Of that wealth, $297,060 is in real estate equity and $296,531 in assets like stocks, bonds, mutual funds, savings, chequing accounts, term deposits and RRSPs. On average Toronto households owe $39,694 in consumer debt on top of their mortgage.
Vancouverites owe just a bit less — $38,424, while Calgarians owe much more; $50,890.
Much of that increased wealth is due to rising real estate prices, says Morin.
Environics Analytics data also show a move out of the stock market and into savings and other conservative investments. Toronto investors increased bank deposits by 47.2 per cent.
According to Statistics Canada data released Tuesday, Canadian household net worth fell 0.3 per cent in the second quarter of 2011 -- a total of $21-billion -- as the increase in the value of residential real estate was more than offset by the latest decline in the value of household equity holdings.
Household debt also grew during the second quarter, a result of both higher mortgages and more consumer borrowing.
The Canadian household-debt-to-income-ratio has increased from 88.6 per cent in 1990 to 150.8 per cent in 2011.