Booming real estate markets have pushed the value of Canadians’ total assets up by 42% over the past six years. But as buying a home has become more costly, Canadians have gone more deeply into debt.

Statistics Canada reports that between 1999 and 2005, total debt in Canada increased by more than 47% — mainly because homes cost more and more families owned a home with a mortgage.

The percentage of families owning a principal residence increased by almost 14% between 1999 and 2005, but the median value of principal residences, allowing for inflation, was up 25% — to $180,000 in 2005 from $144,000 in 1999. In general, families’ principal residences were by far their most valuable asset, accounting for one-third of the $5.6-trillion value of total assets for all families. Employer pension plans came in second, representing 18.5% of all assets.

But total debt, which stood at $760 billion in 2005, was nearly 1.5 times higher than in 1999. Three-quarters of this debt took the form of mortgages, StatsCan says.

People have also been tapping into the increased value of their homes with home equity lines of credit. Although the median value of mortgages on principal residences rose to $90,000 in 2005 from $76,000 in 1999, the median line-of-credit debt — most of it secured on residential assets — surged to $9,000 from $5,800 in the same period. (Figures are all in 2005 dollars.)

StatsCan says its most recent survey of financial security, released at the end of 2006, “provides the most comprehensive statistical portrait yet of the net worth of Canadians — that is, the amount of money they would have if they liquidated their assets and paid off all their debts.”

The survey found the median net worth of Canada’s estimated 13.3 million family units was about $148,400 in 2005 — up 23.2% from 1999 after adjusting for inflation. Favourable economic conditions, a strong real estate market and a rebound in the Canadian stock market contributed to the increase, StatsCan says.

The latest report focuses on median, rather than average, net worth. The agency says median net worth is determined by ranking all family units from highest to lowest net worth, and the net worth of the family unit in the middle of the range is the median net worth. Average net worth divides the total net worth of all family units by the number of family units. The more the average exceeds the median, StatsCan notes, the more Canada’s wealthiest families contribute to the increase in the average.

Indeed, the increase in net worth from 1999 to 2005 was not shared equally by all families. The 20% of family units with the highest net worth in 2005 held more than 69% of all personal wealth in Canada.

As in 1999, elderly families in 2005 had the highest net worth of any type of family, at $443,600. In part, StatsCan says, this is because many live in their own mortgage-free homes and the value of their accumulated pension wealth is higher.

But the report also shows that between 1999 and 2005, the median debt load for families rose by 38% — to $44,500 from close to $32,300. On average, in 2005, Canadians had $13.52 in debt for every $100 in assets. But the debt burden rose as high as $39.40 per $100 of assets for younger families in which the major income recipient was under the age of 35.

Credit card and instalment debt did not change much as a percentage of total debt over the period and, at $26 billion outstanding, represented slightly more than 3% of total debt in 2005. Almost 11 million Canadian families reported owning at least one credit card in 2005 and nearly 73% of families who had credit cards reported they paid off their balances each month. The median limit on all credit cards owned was $10,000. Lines of credit, however, with $68 billion outstanding, represented 9.0% of total debt in 2005, up from 5.7% of total debt in 1999.

Perhaps a more worrying trend highlighted in the survey was the fact that nearly one-third of all families don’t have any pension savings. However, StatsCan notes, the majority of families with no pension savings had lower income from employment. Even though these families apparently have not saved for retirement, StatsCan notes public plans such as old age security, the guaranteed income supplement and the Canada Pension Plan will provide some retirement income. This income may replace a substantial portion of their pre-retirement earnings, StatsCan suggests.

@page_break@The agency also notes that most families without private pension savings are relatively young. They are quite a long way from retirement and still have time to accumulate this type of asset, the agency says. But there are nearly 260,000 family units between the ages of 45 and 64 with employment income of $30,000 and more without private pension assets in 2005.

“Unless they are able to save for their retirement, or have used other methods,” says StatsCan, “they may face a substantial drop in income when they retire.”

The agency also notes that, although many families are relying on equity they have built up in their homes and businesses to provide income after retirement, seven out of 10 families without pension assets did not own homes.

The 2005 survey found almost 64% of people aged 55 and older had retired. It also found about 17% of retirees had returned to work following their first retirement, with financial considerations the most common reason. About 62% of those who returned to work were men; about two-thirds of them were working part-time. IE