BC Negative Savings Rate: Does not Compute

A recent post by Ben over at financialinsights highlighted a BMO report on RRSP vulnerability as a savings vehicle in Canada. Most notably, BC stands out like a sore thumb when it comes to savings rates, defined roughly as the percentage of disposable income not spent:

For 1.5MM households with average income of $75,000, a -4.2% savings rate means spending $4.8BB more than the province’s $113BB reported personal income.

The low savings rate is nothing new and Doug Porter at BMO has opined a low savings rate isn’t necessarily a bad thing if asset prices are increasing:

“While debt has risen to record heights, so, too, have financial assets due to a rebound in equities and an underlying rise in savings”

BC Stats, in its heyday, has released a few interesting reports on savings rates. Here (pdf) is one from 1994, where they state the following observations based on analysis of data from the mid-1960s to 1994:

  • there is a positive correlation between changes in the unemployment rate and savings rate
  • Interest rates are also strongly correlated with BC’s savings rate
  • British Columbians have consistently lagged behind other Canadians in terms of how much of their disposable income is saved
  • Lower savings rates may have to do with: higher consumer prices, age demographics, and lower income growth.
  • Remember this report was published 17 years ago now! Since then, BC’s savings rate has moved negative. There was a more recent paper on savings rate published by BC Stats — I cannot find it any more online — where there was more analysis of the savings rate question as a negative savings rate seemed to indicate a structural problem with the provincial economy.

    The question is, therefore, does BC’s chronically negative savings rate portend a significant structural problem with the economy, or are there other factors at play? There are a few potential answers, including:

    • Unreported income, from internal and external sources,
    • High net worth due to assets accumulated during non-residency
    • Borrowing against, or selling, existing asset equity
    • Assets held by BCers are growth, as opposed to value, oriented.
    • Others?

    All must be occurring in a greater proportion to other provinces. A recent TD report provides some guesses on which of these could be having an effect:

    Reflecting the lofty costs of homeownership, households in British Columbia record the highest vulnerability. In particular, B.C. residents on average register the highest debt-to-income ratio,  debt-service cost, and greatest sensitivity to rising interest rates. What’s more, B.C. is the only province where the average savings rate is negative. None of this is new, however, as the province has systematically been the most vulnerable since the start of our data series in 1999. The structural nature of this challenge suggests that there maybe factors at play that are not being captured in the aggregate data. For example, the province’s relatively large economic reliance on its service sector and self-employment – two areas that tend to have higher-than-average incidences of non-reported income – might be superficially driving down income and driving up the various sub-index readings.

    In addition, B.C. households appear to have adopted coping mechanisms, such as renting out basement apartments, which might not be fully factored into the income side. Even if these factors are part of the story, they don’t address the fact that British Columbia’s [debt] index level has recorded the second fastest rate of increase among the provinces over the past half decade. Higher interest rates over the next few years threaten to leave as many as one in ten households in B.C. in a position of financial stress. On the plus side, rapidly-appreciating home prices in the province has left the debt-to-asset ratio – a metric of household leverage – below the Canadian average. Still, with the home price-to-income ratio pointing to some ongoing over-valuation in the housing market, stable B.C. home values are far from assured.

    Emphasis mine.

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    Just got an email update on a unit from Capitol Residences on Seymour and Robson.

    I believe the building just completed, 10 units already up for sale.

    The cheapest unit is going for 349,000 for a 603 sq ft unit and its on the 25th floor.

    There are two other 1 br units that are 588/585 sq ft going for 40k more then the larger/higher unit.

    Since prices are set by comparables, does anyone know how much sales after that one would be affected by the "underpriced unit"?



    Capital Economics released its Canada Economic Outlook Report (Q1 2011), which predicts sharp falls in Canadian house prices. "Relative to incomes, our calculations suggest that Canadian housing is now just under 40 per cent over-valued, which is about the same level of excess that the US market reached before it collapsed. We have pencilled in a 25 per cent cumulative decline in house prices over three years, mirroring what happened south of the border. "The biggest downside risk is that an adverse feedback loop could develop, as it did in the US, with rapidly falling house prices leading to a contraction in both output and employment, which puts even more downward pressure on house prices." Capital Economics also warns that the government-owned CMHC could be exposed to significant losses should house prices fall significantly. "According to our reading of CMHC… Read more »


    No subprime in Canada?

    "Finally, in an effort to support the housing market in 2008 (when affordability fell sharply and the economy stalled), the Canadian government directed the Canadian Mortgage and Housing Corporation – the government-owned guarantor of high loan-to-value-ratio mortgages (explained here) – to approve as many high-risk borrowers as possible in order to keep credit flowing. As a result, the approval rate for these risky loans went from 33 per cent in 2007 to 42 per cent in 2008. By mid-2007, the average Canadian home buyer who took out a mortgage had only 6 per cent equity in their home, suggesting the risk of negative equity is high even if there is only a moderate correction. "




    Link to Toys-R-Us = skyscraper page:



    @Anonymouse: thanks for the skyscraper page link.

    We learnt a thing or two.

    Hadn't realized that 'Sears' (7 floors), Oakridge Mall (7 floors) and, our personal favourite, 'Toys-R-Us'(1 floor) were classified as 'skyscrapers'. But, there you have it!

    Aaron Chipman


    Troll your writing style is very similar to that of one of my relatives


    "Weak day for sales, the yellow hordes will need to do better…"

    Don't wanna be no yellow peril.

    -"Wild in the Streets" (1967)


    @Troll: Hey look–people are voting up my post with objective numbers that are not great for the bear case. So maybe when people are voting down your posts, it isn't about your 'facts'. Maybe it's about your 'tude, dude.


    @Best place on meth: I'd call you a stupid disingeneous prick but you'll take it as a compliment. You want to get hung up on that one phrase, go ahead, miss the point completely. In my next sentence I'm talking about the increasing sales trend last fall. And I've already clarified a couple of times for your dumb brother and his cousin, but clearly you're not interested in objective analysis. Pretty funny considering you hang out with Realtors.

    fixie guy

    @128 Troll: Sorry dude, Aunt Flo visiting again? Thx but I'll stick with the Teranet numbers.


    I have the month aggregate index going back to March 2002. February 2011 was the SECOND HIGHEST price appreciation of ANY month in the last 9 years. March 18th is indeed coming, but anyone denying that February 2011 was smoking hot is, well, smoking something. Month to Month price increase, top 10 months between March 2002 and February 2011. Feb-07 3.76% Feb-11 3.50% May-06 3.27% Apr-04 3.23% Apr-09 2.71% Feb-06 2.71% Feb-04 2.70% Apr-05 2.57% Jun-09 2.50% Feb-08 2.40% Note that 5 of the top 10 months are Febs. This happens because buyers are out buying, but there hasn't been enough time to accumulate much inventory. Prices rise. February has the highest average price gain of any month. The 3.5% gain in February is equivalent to an annual rate of 51.1%, if the pace were kept up. That is SMOKING… Read more »



    you got it all wrong, I dont give a dam about boxes on the sky here or elsewhere.

    I was talking about what goes on inside. Look at the video again.

    And dont get me talking on vancouver architecture pls, there isnt such thing in Vacouver. Highrises are to architecure as junk food is to haute cuisine.


    @Anonymouse: Tall and ugly is still ugly.


    March 2011 month-end projections Days elapsed so far 2 Days remaining 21 5 Day Moving Average: Sales 167 5 Day Moving Average: Listings 297 SALES Sales so far 352 Projection for rest of month (using 5day MA) 3507 Projected month end total 3859 +/- 787 NEW LISTINGS Listings so far 658 Projection for rest of month (using 5day MA) 6237 Projected month end total 6895 +/- 822 Sell-list so far 53.5% Projected month-end sell-list 56.0% MONTHS OF INVENTORY Inventory as of February 23, 2011 12621 MoI at this sales pace 3.27 Just behind the pace for 7K listings. In 2010, we had 7K listings in March, April, and May. We did 7K listings in April May July 2008, too. And that's it for the last 10 years. 6 times. 7K is a lot of listings. And we have a good… Read more »



    Given you brought up the architecture thing, it's only fair if I point out that there are 63 buildings in Vancouver which are taller than Dresden's tallest. And 310 in Vancouver taller than Dresden's 2nd tallest.

    In North America, Vancouver ranks 5th in terms of number of highrises – behind only New York, Toronto, Mexico City, and Chicago.


    Best place on meth


    Hey scumbag, you first said:

    "Bears, don’t forget that sales over the last half year have been higher than normal."

    You've now changed it to:

    "Look at Agent Will’s graph and tell me that I was wrong that sales were trending up last fall."

    Apologize to everyone here for your misstatement/backpedaling/shifting goalposts – or fuck off.

    Aaron Chipman

    Now look what you bears gone and did!

    Chased away my uncle Dave


    @fixie guy: Hey they still let you post here? Pity. Stay angry, it suits your lack of intelligence.

    Look at Agent Will's graph and tell me that I was wrong that sales were trending up last fall. This is not a sign of market weakness. But I'm sure you can find some other piece of data which suits you better.

    By the way, how's the conspiracy theory going about the developer who's paying people to stand in line? If you can't even accept other explanations than a conspiracy, then how will you accept data that is as plain as day?

    Best place on meth


    Kevin Brauch gets the best gigs, that lucky bastard.

    Anyway, it's a nice building but we have the Planetarium.


    Best place on meth

    Weak day for sales, the yellow hordes will need to do better.

    Dailies – List | Sold

    Vancouver East & West*

    New Listings – 101

    Back On Market Listings -3

    Price Changes -16

    Sold Listings – 45

    Vancouver All Areas*

    New Listings – 301

    Back On Market Listings – 10

    Price Changes – 78

    Sold Listings – 135

    *Attached & Detached – Date: 03/02/2011 Time:17:29 Pacific YatterMatters.com:Courtesy REBGV. Data believed to be accurate but is not guaranteed.



    "When we see smth similar in downtown vancouver, I might start to beleive that we are getting close to the top."

    You're basing your definition of "world class" on a single building?


    Check out this video to see what a world class city looks like:
    When we see smth similar in downtown vancouver, I might start to beleive that we are getting close to the top.

    Selling real estate to each other is nothing to be proud of.

    fixie guy

    It's not fair letting jesse carry the load alone, so here are the Teranet matched sales pairs numbers for Q3 and 4 over the last ten years. 2010 sales look closer to 2008 than 'good'.



    Flying out of Shanghai for Vancouver shortly. Will ask for a show of hands for those on RE buying trip.

    Anyone with property on the market, send me the MLS # now and I'll soften them up over the inflight pepper chicken for modest 2% cut and a promise that I get to come along for the requisite heli ride over coveted crackshack, I mean mansion.