|
Call Now! 1-866-932-8412 or
Email: info@mortgagegirl.ca |
Statistics Canada has published a 2006 study labeled “Impact of home equity on incomes of retirement-age households”, that shows how the equity that homeowners have built up through a lifetime of investment in their homes makes an important contribution to household finances as they enter retirement.
By retirement age, 75% of households are homeowners, and of those, 74% own their homes without a mortgage.
The economic benefit of owning a home is equivalent to the rent that does not have to be paid.
In 2006, when the value of this benefit was taken into account for households headed by individuals in the age group 60 to 69, it increased incomes by $5,500 or 10%.
For households headed by those in the age group 70 and over, incomes rose by $5,400 or 12%.
For households in the age group 70 and over whose household income was ranked in the bottom 20%, home ownership raised incomes, on average, by about $4,200 or 20%.
For households in the same age group whose income ranked in the top 20%, income increased by $10,400, but, in proportional terms, by a more modest 7%.
Note to readers
Recently, concerns have been raised as to whether Canadians are prepared for retirement.
Using data from the 2006 Survey of Household Spending and the 2006 Census of Population, this study estimates the contribution to household finances generated by the home equity of working-age and retirement-age households.
Net income is defined as gross income less income taxes and payments made for Employment Insurance, life insurance, annuities, and public and private pension plans. The benefit of home ownership is defined as the value of housing services provided by home equity. The value of housing services is based on estimates of the financing costs of owning a home and the rents paid for housing.
The research paper “Incomes of Retirement-age and Working-age Canadians: Accounting for Home Ownership,” is now available as part of the Economic Analysis (EA) Research Paper Series (11F0027M2010064, free) from the Key resource module of our website under Publications.
Canadian Consumers are more Confdent but less Capable
by Benjamin Tal
Senior Economist
The Canadian consumer turned in another strong performance in the fourth quarter, as real personal spending climbed by nearly 4% annualized. But a closer look at the data reveals that the recent surge in spending is not backed up by rising consumer fundamentals. In fact, the “V-shaped” recovery in consumer confidence that we have seen throughout the second half of 2009, has actually coincided with a drop in the ability of households to spend.
After reaching a 15-year low in late 2008, consumer confidence, as measured by the Conference Board’s Consumer Confidence Index, has improved by 60%, and is now back to its long-term average. Although still almost 20% below its 2007 peak, it is in a much better position than the corresponding measure south of the border, where consumer confidence is now almost 60% below the level seen in late 2007.
The improving mood of Canadian shoppers over the past few months led to a jump in real consumer spending over the second half of 2009. But while improved sentiment can provide a short-term lift to household spending, a sustainable boost in activity must eventually be backed up by improving consumer fundamentals such as income growth, falling unemployment and reduced debt burdens. To get a better sense of the trajectory of these household fundamentals, we looked at seven key macro-economic factors to construct a proprietary Consumer Capability Index.
Unlike a confidence survey which is based on the results of a subjective survey, this measure does not address the self- reported mood of Canadians, but rather their objective capacity to continue spending. The goal of this indicator is to shed light on consumers’ ability to spend as opposed to their willingness to spend.
Read the rest of the report here:
http://research.cibcwm.com/economic_public/download/feature3.pdf