Personal saving in Canada appears doomed to join such fading skills as cursive writing and knowing how to dial a rotary phone. But just whose fault is it, anyway?

According to Marissa Sollows, senior education coordinator with the New Brunswick Financial and Consumer Services Commission, Canadians spend about $1.65 for every dollar they earn.

She told the CBC recently “the amount Canadians have been saving has been declining consistently in the last 30-plus years and our debt level is increasing.”

Would change employers for a better pension

Last summer, Money Sense magazine picked up on a survey from payroll and HR services company ADP Canada, which found 77 per cent of working Canadians would jump ship to another employer that offered better pension support.

Canadians today find it much more challenging to make a living and save for retirement. Various factors could account for this, not the least of which is the foolhardy need to keep up with the Joneses, whoever they are.

But in our more populous urban centres, I believe the trend is being driven by the soaring costs of home ownership.

The problem may be that it’s become too easy to borrow, both in terms of lending requirements and our extended period of low interest rates. It’s too easy to purchase too much house and be left cash-flow poor as a result.

The cruel edge of supply and demand

In this Catch-22, the further consumers can stretch themselves to buy increasingly costly real estate, the more housing prizes rise. It’s the simple law of supply and demand. If the market looks like it can support higher prices, then prices are sure to increase.

But look at the consequences. Take this story published this week by Metro News. The typical young person now takes almost 20 years to save a 20 per cent down payment on a home in Toronto, 13 years longer than it did in 1976.

Or this story from Vancouver, where Victoria home prices are starting to surge as people flee Vancouver’s over-inflated market in exchange for a 95-minute ferry ride as part of their morning commute.

This doesn’t surprise me. As I’ve written before, whenever The Powers That Be made it easier to purchase a home, demand rose and so too, did market prices. This occurred when two incomes could be combined to qualify for a mortgage, when the minimum down payment was reduced, when amortization periods were lengthened, and of course, whenever mortgage rates dropped.

My predecessor worked for the Canada Mortgage and Housing Corporation (CMHC), and once said policies intended to make housing more affordable and accessible actually didn’t. They just made housing more expensive!

Won’t save, or just can’t?

I don’t think it’s a case of people not wanting to save, they just can’t afford to as their parents did. They must either choose a claustrophobic residence ill-suited for a young family if they want a reasonable commute, or head far out into the hinterlands and face a long commute that doesn’t leave them with much quality of life.

There have been suggestions that big cities like Toronto could end up hollowed out and empty, filled with vacant housing units no one can afford to occupy. This is absurd. The market would correct itself before such an unnatural dynamic could occur. The thing is, people still have the appetite and the means to buy, they just can’t afford much else afterwards.

According to CMHC, Toronto finished 2016 with 37,269 housing starts, a strong number driven by “improved economic conditions and migration.” That’s on top of 39,230 in 2015. Home resale values finished the year up 20 per cent from December 2015.

People keep buying

People are buying despite double-digit increases in valuations. They are doing whatever they must to find a way, even if that means borrowing against their future.

Now, there is a large proportion of home owners destined to make huge returns in markets like Toronto if and when they decide to sell and retire to some quiet backwater. These are the folks who bought their home 20 or 30 years ago when market prices were a fraction of what they are now.

For them, there may simply not be much incentive to save – their home is their retirement nest egg. Or at least they hope it will be. The danger, of course, is a market correction that shaves the icing off the cake.

How far can that equity really take you?

The other risk factor is sitting on a pile of equity can make you complacent about managing discretionary spending. People at or near retirement age these days need to budget for the fact they are likely to live to a ripe old age in retirement. They run the risk of outliving their money.

Millennials are also turning to the bank of mom and dad to help them fund their home purchases. If only one set of parents helped out one child to buy a house there would be no impact.

But, if plenty of parents help plenty of children, this in turn will continue to drive demand and price increases will follow. No one is better off – we just live in higher-priced housing and have less cash to save. A perceived pile of home equity can be easily eaten away.

So what are we to do? It’s one thing to look at the housing market as an investor and quite another as a consumer looking for home in which to raise a family. One buyer is driven by fundamentals, the other by amenities and convenience.

All I can suggest is that the typical consumer might be best served by looking at their home purchase through the same critical lens as the savvy investor focused on making a solid return.

To discuss this or any other valuation topic in the context of your property, please contact me at jclark@regionalgroup.com. I am also interested in your feedback and suggestions for future articles.