Debt has surged among Canadian families — but so has net worth

The good news is, Canadian families have never been wealthier, largely because of how much the values of homes have increased.

The bad news is, Canadian families have never been more in debt, largely because of how much the values of homes have increased (and subsequently the size of mortgages).

Statistics Canada said Wednesday debt levels have soared over the past decade for both individuals and families – but so too has the value of assets owned by individuals and families.

Among families with children 18 and under, median debt held by this group more than doubled between 1999 and 2012, or by $87,400 Statscan said. But the median value of assets held by this group, such as a home or financial holdings like pension plans or investments, climbed 86 per cent, or by $245,100.

MORE: Canadians’ net worth hits new highs, debt bubble a ‘myth’: experts 

Older families meanwhile incurred less debt than younger ones and single households between the two time periods, the federal statistics agency said in a new report.

Households headed by income earners in the 35-to-44 age group had 126 per cent more debt in 2012, compared to the same cohort in 1999, in constant dollars. The median value of assets held by this group – meaning half the families held assets worth more, half less – rose by 77 per cent, though, or $179,800.

Tied to boom

Almost all of it — the rise in debt and asset values — is almost exclusively tied to the real estate boom.

“Most of the increases in debt values were attributable to rising mortgage debt,” Statscan said. “In the case of assets, a large portion of the increase was a result of rising real estate values.”

MORE: Sturdy as a house of cards? A look at Canada’s property boom

Experts caution asset values – like those tied to real estate – are often subject to market fluctuations, and could eventually come down. Debt burdens however aren’t as easily moved, with borrowers still on the hook for bank loans and other debts even if the assets they were used to purchase decline in value.

More at risk

Statscan said about seven in 10 Canadian households were carrying some form of debt in 2012 – not a meaningful jump from 1999 when 67 per cent of families held some debt.

But a third of families have seen their overall debt levels surge to more than 200 per cent of their annual after tax income, up from a quarter in 1999. That puts more households at risk of financial hardships in the event of a job loss or other economic shock.

Since the end of 2012, national home values have raced higher in major markets like Calgary, Vancouver and Toronto, while debt levels have generally kept rising as well, experts say, deepening the trends in Statscan’s report.

“Such results suggest Canadian families became more indebted over the period, but did so against a backdrop of rising asset values, notably real estate worth,” the federal agency said.