The wealth gap between the rich and poor in Canada widened at the fastest pace on record in the first quarter of 2023 compared with the year before, according to Statistics Canada, amid high inflation and declining real estate values.
The gap in net worth grew by 1.1 percentage points in that timeframe, the fastest it has grown since 2010, when the agency began keeping the record.
The gap was still lower, though, in the first quarter of this year, when it sat at 65.1 percentage points, compared with 65.6 points in the first quarter of 2020. The wealth gap previously declined 1.6 percentage points between Q1 2020 and Q1 2022.
The top 20 per cent of earners in Canada held 67.8 per cent of the country’s net worth in the first quarter, compared with the bottom 40 per cent holding 2.7 per cent. The difference between those amounts equals the wealth gap.
“Most wealth is held by relatively few households in Canada,” Statistics Canada said in its report released Tuesday.
The least wealthy households tend to be younger, according to the report. Those younger than 45 years old made up 55.2 per cent of the bottom 40 per cent of net worth in Canada, despite making up 36.2 per cent of all households.
Recent economic pressures, such as inflation, have hit the least wealthy harder as well, the report notes, with their wealth down 13.8 per cent in Q1 compared with the same quarter the year before — more than triple the rate of the wealthiest.
Lower real estate prices drive decrease in wealth
The net worth for all households was down in the first quarter of 2023, the report says, and lower real estate prices are mostly to blame.
The average net worth for households younger than 35 years old was down the most at 8.7 per cent in the first quarter of 2023, while the net worth for households aged 55 to 64 years old was down 1.8 per cent.
That coincides with the national average price for a residential home falling to $686,000 by the end of the first quarter, which is down 13.7 per cent compared with the same quarter last year, StatCan notes. It adds that the average value of real estate held by households went down 8.6 per cent in that same timeframe.
The housing market saw a correction last year as the Bank of Canada started raising interest rates, making it more expensive to borrow. However, the most recent national data shows sales activity and prices have started to rebound in recent months.
“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,” StatCan said.
“In the first quarter, real estate accounted for 88.3 per cent of wealth for households aged less than 35 years, compared with 40.1 per cent for households aged 65 years and older.”
Mortgage debt also increased by 23.8 per cent for the least wealthy, StatCan said, outweighing their real estate holdings value increase of 6.2 per cent.