Canadians’ Most Valuable Asset Is Shrinking: Real Estate Is Dragging Down Consumption and the Economy

Despite years of high interest rates, inflation, and trade uncertainty, Canadian consumer spending has remained more resilient than many expected.

Helen Lao, a capital markets economist at CIBC, noted in a recent report that consumer confidence surveys have been near rock-bottom levels, and many workers have seen wage growth barely keep up with prices. Yet consumer spending in both Canada and the United States has continued to grow.

The key reason is not a major improvement in wages. It is the growth of household wealth on the balance sheet.

Data show that in the first quarter of 2026, U.S. household wealth surpassed US$183 trillion for the first time, while Canadian household wealth reached a new high of C$18.6 trillion. Over the past few years, rising stocks and other equity assets have helped offset stagnant wages and weak consumer sentiment.

Stocks Are Becoming a Major Driver of Household Wealth

In the United States, the structure of household wealth has changed significantly.

In 2010, stocks and other equity assets accounted for about 23% of total U.S. household assets. Today, that share has risen to 35%, surpassing real estate as the largest category of household wealth.

Canada has seen a similar shift. The share of stocks and other equity assets in household wealth rose from 26% in 2010 to 32% in the first quarter of 2026.

CIBC expects stock wealth growth to contribute about 30% of U.S. real consumption growth in 2026, up from 18% in 2024. In Canada, the contribution of the stock wealth effect to real consumption growth is expected to rise from 18% in 2024 to 35% in 2026.

In other words, when wage growth is weak, growth in stocks, funds, and other financial assets is becoming an important support for household wealth and spending power.

Real Estate Still Makes Up Nearly Half of Canadian Wealth, but It Is Shrinking

The biggest difference between Canada and the United States is that Canadian household wealth remains heavily concentrated in real estate.

In 2012, real estate accounted for 52% of Canadian household wealth. After several years of home price adjustment, that share had fallen to 46% by early 2026, but it still remained the largest asset category for Canadian households.

Economists often refer to the “wealth effect.” When home prices and stock prices rise, people feel that their net worth has increased and may become more willing to spend. When asset prices fall, households feel less wealthy, and their willingness to spend may decline.

At this point, the wealth effect from Canadian real estate has turned negative.

Because real estate represents a much larger share of Canadian household assets than it does in the United States, and because Canada’s housing market correction has been more visible, falling home values are having a larger impact on household consumption and the broader economy.

Helen Lao noted that real estate wealth is expected to become a meaningful drag on Canada’s real consumption growth in 2026. CIBC believes that the wealth effect will still support U.S. consumption this year, but in Canada, it may become a headwind to economic growth.

Real Estate Once Supported Consumption. Now It Is Weighing on the Economy.

For decades, Canadian real estate prices generally rose, and many households developed a deeply rooted belief: buying property equals investing, and rising home prices equal wealth creation.

When home values were rising, homeowners felt more comfortable renovating, spending, borrowing, or extracting home equity. Real estate prosperity supported mortgage lending, construction, renovations, property transactions, and consumer activity. Gradually, the Canadian economy became more dependent on rising home prices.

But the other side of this model is that household wealth, the credit system, and consumer spending became increasingly tied to real estate.

Once home prices stop rising, the sense of wealth built on appreciation can quickly weaken. For families who bought near the peak with large mortgages, a decline in home value can happen at the same time as higher monthly payments and elevated living costs.

Real estate is therefore shifting from a previous wealth engine into a source of pressure on household cash flow and the Canadian economy.

Ai Financial: Real Estate Is a Store-of-Value Tool, Not a Financial Investment Tool

Ai Financial has long believed that real estate is better understood as a family living asset and a long-term store-of-value tool. It should not be treated as a primary financial investment tool.

A principal residence provides a place to live and may help preserve purchasing power over the long term. But real estate also comes with high transaction costs, low liquidity, significant carrying costs, and heavy concentration risk. Buying one property often means tying decades of income and debt to one city, one neighbourhood, and one asset.

This is fundamentally different from financial investments such as stocks and funds.

Financial assets can be diversified across industries, countries, and companies. Capital can also be adjusted more easily based on household needs. High-quality companies can create value through profits, innovation, and productivity growth, and investors may have the opportunity to participate in that long-term growth.

Canada, however, has been held back by excessive dependence on real estate.

Many households viewed rising home prices as their main source of wealth. Bank lending growth became heavily tied to housing. Local finances benefited from land development and transaction activity. Younger buyers were pushed into the market at higher and higher prices. Large amounts of capital became trapped in homes and mortgages instead of flowing into more productive companies, technologies, and financial assets.

When home prices were rising, this system made it appear as though everyone was getting richer. When home prices started falling, the problems became more visible: household wealth shrank, consumption weakened, mortgage pressure increased, the real estate industry cooled, and the broader economy was dragged down.

Canada Needs to Move From “Everyone Chasing Housing” to Financial Investing

Ai Financial has never been optimistic about treating real estate as the main direction for investment. We have consistently encouraged more Canadian residents to participate in financial investments such as stocks and funds.

This does not mean families should give up owning a home. It means households should reconsider the role that housing plays in their overall asset structure.

A home should first serve a living purpose, and second, it may serve as a long-term store of value. Capital intended for growth and participation in economic development should increasingly be allocated toward financial assets that can create earnings and productivity.

CIBC’s data already show that equities are becoming an important force supporting Canadian consumption growth. In 2026, the stock wealth effect is expected to contribute 35% of Canada’s real consumption growth, while real estate wealth is becoming a drag.

This shift suggests that Canada’s old wealth model, which relied too heavily on real estate, is becoming harder to sustain.

For ordinary families, financial investing should not wait until the mortgage is fully paid off or income reaches a certain level. TFSA, RRSP, and other investment accounts provide different long-term investment channels. Investors can build allocations gradually based on income, age, retirement goals, and risk tolerance.

A home can provide shelter and long-term value preservation. Stocks and funds give households the opportunity to participate in business profits, technological progress, and economic growth.

Canada’s economy has already paid a price for relying too heavily on real estate. Going forward, the real priority is helping more families move from “only a house” toward “a house plus financial assets,” so that wealth growth no longer depends entirely on the next housing boom.