OTTAWA (Reuters) - Canada's problem of high personal debt and a heated housing market appears to be improving but concerns remain and it will take "some time" for this risk to go away completely, the Bank of Canada said on Thursday.

In a semi-annual report, the central bank said overall risks to the Canadian financial system had diminished somewhat but still remained "high", the same risk classification it designated six months ago.

The biggest overall threat remains the euro-area crisis, although the bank said that was diminishing slightly. But the number one domestic risk comes from household finances and the housing market as consumers take advantage of five years of historically low borrowing costs to buy homes.

Since the last assessment in December, household debt accumulation has slowed, housing resale activity and starts have moderated and prices stopped rising in most major cities.

"Despite these positive developments, concerns remain. The level of indebtedness is still elevated, and the bank's stress test simulations suggest that households are vulnerable to adverse economic shocks," the bank said in its Financial System Review.

It pointed to stretched housing valuations in some areas and signs of overbuilding in the condo market. The imbalances "will take some time to correct" and should unwind gradually, it said, though there is a risk of a sharper correction.

The household debt-to-income ratio will likely remain near the current record high 165 percent this year, the bank predicted.

(Reporting by Louise Egan; Editing by Randall Palmer)

BRENT JANG
VANCOUVER — The Globe and Mail
Published Tuesday, Jun. 04 2013, 3:24 PM EDT 

Greater Vancouver’s real estate market is finally perking up after a 19-month slump. The Vancouver area’s housing sales volume rose by 1 per cent in May amid early signs that the region’s property market could be slowly inching back. The number of resale properties that changed hands on the Multiple Listing Service last month was 2,882, up from 2,852 sales in May of 2012, according to the Real Estate Board of Greater Vancouver.

The board’s May home price index which strips out the most expensive properties, was $598,400 for single-family detached homes, condos and townhouses – a decrease of 4.3 per cent from the same month in 2012, but up 1.8 per cent since January of this year.

The slight increase in homes sold on the MLS in May – an extra 30 compared with a year earlier – contrasts with monthly decreases in sales volume last year that ranged from 13.2 per cent to 32.5 per cent. In February this year, sales volume fell 29.4 per cent year-over-year, but the pace of transactions has been gradually picking up since then.

The last time that Greater Vancouver experienced a year-over-year gain in monthly sales came in September of 2011, when 2,246 properties were sold, up 1.1 per cent from 2,220 in September of 2010.

Greater Vancouver board president Sandra Wyant said the number of resale transactions last month was still 19.4 per cent below the 10-year sales average for May. Last month’s volume was 9.7 per cent higher than April’s 2,627 sales. Ms. Wyant is encouraged by a measurement known as the sales-to-active-listings ratio, which registered 16.7 per cent in Greater Vancouver in May. B.C. real estate agents consider it a balanced market when the ratio ranges from 15 to 20 per cent. It is deemed a buyer’s market below 15 per cent and a seller’s market above 20 per cent in the Vancouver region.

“Based on the statistics, we’re definitely seeing a trend into a balanced market,” Ms. Wyant said in an interview. “The amount of listing inventory has begun to decrease, so it’s not a marketplace where you have a lot of time to make decisions any more. The sellers and the buyers are working together to get homes to sell. You need to be prepared and ready to buy at close to the list price, if the property is priced well.”

The total number of active listings in May was 17,222, or a 3.4-per-cent decline from a year earlier. There were 5,656 new listings in May, or an 18.3-per-cent decrease from 6,927 new listings in the same month of 2012.

Sellers are increasingly avoiding a boom-time mindset and becoming realistic with their list prices, and that translated into a flurry of transactions that came within 98 per cent of the asking price last month, Ms. Wyant said.

BCREA Revises Fraser Valley's 2013 Forecast

On January 30, BCREA's senior economist Cameron Muir released the first quarter housing market forecast for BC including breakdowns for Fraser Valley and Greater Vancouver.

The 2013 predictions for Fraser Valley have changed since last fall, becoming more conservative. Muir still expects home sales to increase in 2013 compared to 2012, but not to the degree that his department anticipated three months ago. In addition, he's forecasting home prices will moderate at a slightly faster rate.

Fraser Valley REALTORS® can expect sales to increase by 2.4 per cent this year compared to 2012; and average MLS® prices will continue to slide 3.3 per cent this year on top of the 3.7 per cent reduction during 2012.

Muir states in the report, "Headwinds in the global economy continue to constrain growth in British Columbia. The US has yet to generate enough employment to take a serious bite out of their jobless rate, while early signs of burgeoning domestic demand in China weren't enough to keep economic growth from slipping to a ten-year low in 2012."

The forecast describes 2013 as a transition year to next year when sales are expected to rebound even further and prices will stabilize. In 2014, BCREA is predicting an increase of 7.5 per cent in Fraser Valley home sales and prices to remain flat (-0.6 per cent) compared to this year.

Muir describes lower home prices in the Fraser Valley as a move in a positive direction improving affordability and encouraging potential buyers back to the marketplace. "In addition, many potential buyers that stayed on the sidelines in 2012 will likely enter the marketplace over the next year as the relatively strong financial condition of BC households precludes any deflationary spiral."

For Greater Vancouver in 2013, Muir is forecasting slightly stronger sales than Fraser Valley, an increase of almost 10 per cent this year compared to 2012, and not quite as high reductions in MLS® home prices -2.2 per cent on average in 2013 and -0.3 per cent in 2014.

CMHC's Housing Market Outlook, released in the fall of 2012, anticipates sales in the Fraser Valley will increase by 1.4 per cent in 2013 compared to 2012, while prices remain relatively stable. CMHC only releases two forecasts per year — spring and fall — while BCREA releases quarterly.

Provided by the Fraser Valley Real Estate Board. Full the full BCREA report including graphs please follow this link: http://www.bcrea.bc.ca/news-and-publications/news-room/news-releases/housing-forecast-news-release

Looking for a down payment on a home? Check your RRSPs 

New rules enhance the Home Buyer’s Plan program 

If you’re a first-time homebuyer, with the federal Home Buyer’s Plan you may be eligible to withdraw funds from your registered retirement savings plan (RRSP) for a down payment when buying or building a qualifying home.  Under the program you can now withdraw up to $25,000 without tax penalties, according to measures announced recently in the 2009 Federal Budget.

Here is a basic overview of some of the rules:

• You must be considered a first time homebuyer, i.e. you cannot have owned an owner occupied home in the previous five years.

• You must be a Canadian resident.

• The property purchased must be for a principal residence.

• The RRSP must be repaid within 15 years, with minimum annual payments of 1/15th of the withdrawn amount.

• Funds must have remained in your RRSPs for a minimum of 90 days before they can be withdrawn under the Home Buyers Plan.

• You will have to complete Form T1036, “Home Buyers Plan (HBP) – Request to Withdraw Funds from an RRSP” available at the Canada Revenue Agency website www.cra-arc.gc.ca in the RRSP section.