Real estate purchases fueled by low interest rates have pushed household debt levels in Canada to a new record.
The value of real estate owned by households in Canada rose $1.5 trillion to $8.3 trillion in 2021, according to national balance sheet data released by Statistics Canada.
Low interest rates, demand for space during the COVID-19 pandemic, and strong immigration flows led to a record 22% appreciation in the price of houses, land and other buildings owned by Canadians.
That increase lifted the average net worth per person in Canada to $449,450 at the end of last year, up by nearly 25% from 2020.
Much of the real estate activity has been driven by new mortgages, with the ratio of household debt to income climbing to a record 186% at the end of 2021.
The numbers show that historically low interest rates have been inflating the nation’s housing market and fueling financial stability risks through debt, giving the Bank of Canada one more reason to aggressively raise interest rates this year.