Canadian Household Wealth Resilience in Q2 2025: Equity Gains vs. Housing Headwinds

In Q2 2025, Canadian household wealth dynamics revealed a stark divergence between equity-driven gains and housing market headwinds. While the stock market delivered robust returns, real estate prices faltered, exacerbating wealth inequality and reshaping investment strategies. This analysis examines the interplay between these two asset classes, their regional and sectoral drivers, and implications for Canadian households.

Equity Market Resilience: A Sectoral Breakdown

The Canadian equity market demonstrated resilience in Q2, with the S&P/TSX Composite Index surging 8.53% year-over-year [1]. This outperformance was fueled by strong earnings and macroeconomic stabilization, particularly in small-cap stocks, which rose 11.8% compared to the 8.5% gain in large-cap benchmarks [4]. Sectoral contributions highlighted divergent trends: the Information Technology sector led with a 14.24% return, followed by Consumer Discretionary (14.05%) and Financials (12.14%) [1]. Conversely, the Energy sector lagged, posting a modest 1.29% return amid global trade uncertainties [1].

This performance underscores a shift in investor sentiment toward growth-oriented sectors, particularly in the technology and discretionary spaces. As noted by Segal Co. in its Q2 markets commentary, the equity rally was underpinned by optimism about small-cap innovation and macroeconomic normalization [1].

Housing Market Headwinds: Regional Divergence and Affordability Challenges

In contrast to the equity market’s vigor, the housing sector faced significant headwinds. Nationally, the average home price fell 1.7% year-over-year to $677,368 in 2025 [3]. Regional disparities were pronounced: Ontario and British Columbia, home to Canada’s most expensive markets, recorded year-over-year declines of 3.0% and 2.6%, respectively, driven by high inventory levels and weak demand [4]. Meanwhile, Quebec City defied the trend, with aggregate home prices rising 13.5% year-over-year, and the Prairies showed resilience amid stronger demand [4].

The Bank of Canada’s decision to maintain its overnight rate at 2.75%—a pause in rate cuts due to inflation concerns—further compounded housing market pressures [1]. As RBC economists observed, affordability challenges persist in Ontario and British Columbia, where high prices and stagnant wages have left many households vulnerable [2].

Wealth Inequality: A Tale of Two Markets

The contrasting performances of equities and real estate have deepened Canada’s wealth gap. According to Statistics Canada, the top 20% of households now own over two-thirds of the country’s wealth, with real estate and diversified investment portfolios accounting for the bulk of their holdings [1]. Meanwhile, lower-income families, who rely more heavily on real estate for wealth accumulation, faced declining home values and rising debt burdens [1].

This disparity is particularly evident in high-cost regions like Toronto and Vancouver, where housing price declines have eroded equity for many middle-class households. In contrast, wealthier investors have capitalized on equity market gains and resilient markets in Quebec and the Prairies to diversify their portfolios [4].

Outlook and Strategic Implications

Looking ahead, the Bank of Canada’s cautious monetary policy and global trade tensions are likely to keep housing market volatility elevated. RBC forecasts further declines in Ontario and British Columbia in the second half of 2025, with national home prices expected to rise only 0.7% for the year [2]. Conversely, the Prairies and Quebec are projected to see modest gains, offering pockets of opportunity for investors [1].

For equities, the focus remains on sectors poised to benefit from technological innovation and consumer spending. The Information Technology and Consumer Discretionary sectors, which outperformed in Q2, are expected to remain key drivers of growth. However, Energy sector underperformance highlights the risks of global economic uncertainty [1].

Investors must also consider the long-term implications of wealth inequality. As lower-income households struggle with declining home values and stagnant wages, demand for affordable housing and social infrastructure may rise, creating new investment opportunities in public-private partnerships and affordable housing developments [4].

Conclusion

Q2 2025 has underscored the divergent trajectories of Canada’s equity and housing markets. While equities have provided a buffer against real estate declines, regional disparities and wealth inequality remain pressing challenges. For investors, a balanced approach that leverages equity market resilience while hedging against housing market volatility will be critical in navigating the evolving landscape.

Source:
[1] Markets Commentary: Second Quarter 2025, [https://www.segalco.ca/consulting-insights/markets-commentary-second-quarter-2025]
[2] Canada's housing market forecast update - RBC, [https://www.rbc.com/en/thought-leadership/economics/canadianhousing/special-housing-reports/canadas-housing-market-forecast-update/]
[3] Housing Market Forecast (2025-2027), [https://www.truenorthmortgage.ca/blog/housing-market-forecast]
[4] Home Price Update and Market Forecast Q2 2025, [https://reimers.ca/blog.html/home-price-update-and-market-forecastq2-2025-8747477]