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Apparently Vancouver Became Canada’s First ‘City of Millionaires’ in 2015

Hahahahahaha.

Some millionaires protesting for some reason. Photo by Flickr user Caelie_Frampton

Good news, Vancouver! We're all millionaires. Or, at least a study released today found that we're Canada's first "city of millionaires" when you look at average net worth per household. Vancouverites' average net worth apparently reached $1,036,202 in 2015, up 7.1 percent from $883,049 in 2014.

The new WealthScapes report found the "average" Vancouver household got richer than everyone else in the country, thanks to a real estate boom that kindly divorced itself from reality last year. And meanwhile, cities with oil-based economies like Calgary, Edmonton and St. John's took a hit because of the downturn in oil prices that started in late 2014.

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I called up the study's lead author Peter Miron to find out more about this "average" Vancouver household, and what it means for Canada's economy. He told me the "vast majority" of us aren't actually millionaires, thanks to wealth "polarization." Multi-millionaires, he says, are obviously pulling up that average, while a huge chunk of us struggle to keep afloat. But because real estate investment anticipates long-term growth, his team at Environics expect that overall rise in wealth to continue into 2016.

"When you think about real estate, it's got this wonderful attribute in that it's not really measuring wealth of today so much as it's describing future and anticipated wealth trends," Miron told VICE. "You don't take on the debt and costs if you don't expect those fortunes to pan out in the future."

When I ran these findings by economist Marc Lee, he didn't think "city of millionaires" describes what's really going on. "It doesn't resonate with the lived experience of a lot of people—if anything [real estate] is causing more problems," Lee told VICE, adding "city of dumb luck" might be more fitting.

Read More: Is Canada Really Sitting on a Real Estate Bubble That's About to Burst?

Because housing values have gone up so quickly, property owners who got in a decade ago have reported on-paper gains higher than what they've earned over a 20-year career. "Most of the people who have made phenomenal gains aren't shrewd investors, they were just in the right place at the right time."

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By Lee's estimation, the top 20 percent of wealthy people in the city own nearly 70 percent of the real estate market, while the bottom half essentially owns nothing. "That's arguably worse now because of the surging in the market," he said. "That has benefited those who are already in the market."

Miron's report also found Vancouver is taking on more debt than the rest of the country, which exposes the city to a few economic risks.

"The first risk is a severe downturn in the local economy that affects incomes," he told VICE. Miron says this is an unlikely scenario, since incomes have been going in the opposite direction, thanks to a growing export market.

The second risk is a real estate shock, likely caused by interest rates going up. Vancouver's real estate market is already showing signs of a slowdown. Sales dropped 26 percent in August following a new tax on offshore investment.

"The biggest worry is all of a sudden our expectations get reset," Miron told VICE. "If there's anticipation of a massive correction, that drives away buyers, and becomes a bit of a self-fulfilling prophecy."

According to the latest Bloomberg survey on Canadian housing attitudes, more people than ever are expecting the real estate market to take a hit in the coming months. Now 22.5 percent of Canadians are expecting prices to come down.

Lee says the young people who barely squeezed into the market by taking on massive amounts of debt will be the most vulnerable, should prices take a tumble. So maybe don't change Vancouver's welcome sign to "City of Millionaires" just yet.

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