[Flash Walken]

Last week, the Bank of Canada cautioned that “high consumer debt loads and imbalances in the housing market” are making Canada’s financial system more vulnerable, and “remain a concern.” The housing market remains stubbornly strong, despite prices that, by the central bank’s new estimates, are between 10 and 30 per cent overvalued.

“Given the record debt ratio, there’s nothing here to change the Bank of Canada’s view that high household debt is a significant risk to financial stability. However, the downward revision to the debt figures and continued strength in net worth should keep concerns from worsening,” said Bank of Montreal senior economist Benjamin Reitzes in a research note.

Separately, the Canadian Real Estate Association reported that new-house sales were flat in November compared with October, and were up 2.7 per cent from a year earlier. CREA said year-to-date sales are up 5 per cent from the same period in 2013, but are a more modest 2.4 per cent above the 10-year average. The MLS Home Price Index was up 5.2 per cent from a year earlier, down slightly from October.

“The Canadian housing market remains a story about how sales and prices are still running strong in some areas while others are seeing subdued levels of activity with slower price gains or modest price declines,” said CREA president Beth Crosbie in a news release.

The Statscan debt report, which also covers corporate and public-sector debt, said total government deficits were $7.2-billion at the end of the third quarter, down from $10.4-billion a year earlier. The federal government’s net-debt-to-GDP ratio, a key measure of the country’s government debt burden, was 31.5 per cent, down slightly from 31.8 per cent in the second quarter.

Meanwhile, the non-financial corporate credit-market-debt-to-equity ratio, a key measure of the corporate debt burden, rose slightly to 58.5 per cent in the third quarter from 57.4 per cent in the second quarter. The ratio is at a post-recession high, but remains tame by pre-recession historical standards.

Economists said the recent sharp drop in oil prices could elevate the risks surrounding the country’s debt levels, as it poses a threat both to the country’s total incomes and to the health of some of the country’s more bloated regional housing markets.

“The recent collapse in oil prices likely to have an adverse effect on Canada's growth over the next year, and particularly on incomes in oil-producing regions. Now, household debt risks are heating up once again,” said Toronto-Dominion Bank economist Leslie Preston.

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