TD Bank:OVERPRICED AND OVERBUILT: CANADIAN HOUSING

依勒特

During Canada’s “Housing Boom”, which ran roughly
from 2002 to 2008, unsustainable price increases drove
1 ]. F4 S# y  f, K$ A1 h. ]7 i! Junsustainable levels of building. Our view is that house
prices exceeded the value of housing that was justified by
fundamentals by approximately 9% nationwide. This
& n9 h( D2 ?2 ]' C; i; z1 doverpricing compelled a level of residential construction
that exceeded its fundamental-justified level by approximately
12%, an excess that was exaggerated in the past
three years.
By “overpricing” we mean that prices detached from
their fundamentals, as witnessed by a steep erosion of
affordability. The current unwinding of house prices reflects
both a cyclical downturn and a return of house prices
to fundamentally justified levels.
5 F- F, d/ c5 ZWe consider “overbuilding” of two forms: “demanddriven”
3 e3 V0 m2 n: cwhere homebuyers buy up too many houses and
1 ^: [, R" R) ]5 V: [that this demand cannot be sustained; and “supply-driven”
+ m1 z6 ]& c" [$ p3 vwhere builders accumulate excessive inventories. Although
there is evidence of both types, we contend that Canada’s
“overbuilding” was mainly of the first type, where
7 S( ?3 Q- B4 ~" zhomebuyers pushed homebuilding to an unsustainable pitch
* ]  ^! `" B7 c: S+ x* Cthat is now being rapidly reined in.
9 U7 w% G' T, @' e& IWhile most markets won’t face U.S.-style overhangs,
the construction of too many new homes over the boom
means a deepened slump. This overbuilding will likely weigh
" C! T4 O, t% m5 N8 z% j' }on markets over the next few years. Even as Canada recovers
7 k0 [: P: ~: }6 ?) R& z9 K% Bfrom the cyclical downturn, house price growth will
$ w3 u3 o! @2 N5 \! Yremain choppy and new residential construction will be
. a( G, m$ h8 r* `" F8 fdampened, owing to this structural weakness. Construction
6 b/ C+ O0 \1 l1 X8 F8 Jis now undershooting fundamentals and we expect this
, b/ L9 y2 a  Mto persist over 2009 to 2011. We anticipate that nationwide
residential construction will fall further to around
2 o  x, O3 |% E0 i# e, f2 b125,000 starts over 2009 with a trough around 115,000 units
in the fourth quarter.
To quantify the degree of overpricing and overbuilding,
1 A) s: d2 _* Uwe first develop an empirical model, based on long-run
fundamentals of house prices and housing starts in each
+ F* M% W% d4 B! T" qprovince. Affordability is the key concept behind home
! m1 U! U; ?& l0 N  Evalues since house prices should track incomes over the
long-run. Since homebuilders build to meet demand, we
) h) _3 S% b: c0 }8 X* z9 Vregard housing prices and household formation as the drivers
  |  @, I2 c4 r% o( n/ H7 g! Zof residential construction.
) V4 t7 c6 `4 U+ B# G' ~# XTo examine the degree of overbuilding, we employ a
; w5 ^4 v2 `) q: Q, ]0 u6 K“counter-factual,” asking what level of residential construction
would have occurred if housing had been priced
optimally. We find that actual homebuilding exceeded this
fundamental-justified level by about 12%. Although new
/ x2 {2 s6 J# O. k. @/ L; Runits were being absorbed, homebuyers simply bought too
many houses at prices that exceeded fundamentals.
1 J. e! r8 ^* j8 MRegionally, we see the greatest strains on the Prairies,
: W: t/ @1 m( |4 v: vwhere housing demand will further contract under waning
population inflows. Saskatoon, Calgary and Edmonton are
7 B/ t5 l$ b, Y" X; ~2 x2 L, Dalready witnessing surges in their unsold new homes at the
3 f& W% y; U$ G. }& ?5 wvery time that the resale market has swung into strong
buyers’ territory. Homebuilding in the Atlantic provinces
has been relatively balanced but, while not plagued by structural
weakness, will be singed by the downturn nonetheless.
, g, z1 R) Z8 rQuébec shows signs of strain – especially given the
strange accumulation of unabsorbed multiples on l’Île de
/ x$ s, L: ~, O2 G+ mMontréal – but recent building has been relatively balanced,
given the province’s history of under-building and low ownership
/ z* P5 b  O& P# R7 b9 ]4 Vrates. While Ontario homebuilding will reel from a
cyclical downturn, the degree of structural weakness appears
$ m. G+ z$ J2 A1 o5 O4 V& q8 Y/ ilimited – with the important exception of the Toronto
; M6 w0 Y! J) ^! O' j9 q9 S. X" I: V+ |  Wcondo market. Both in Toronto and Vancouver, historically
$ u( T* B! j5 q) M* L1 Z+ I/ m2 Uhigh levels of apartment-style units presently under
8 a! C5 Y- z! f6 L. n! s* b4 I* Mconstruction mean that record numbers of condos will
reach completion during 2009. If absorption rates fall, as
cyclical factors would indicate, condo inventories could
spike severely – particularly in Vancouver. However, while
residential construction in B.C. will definitely droop, we
2 r  @! B$ Y6 r- u0 Y$ kanticipate that the West Coast will continue to benefit from
  C( M4 T' U( x: w  Z9 qinter-provincial and international migration over the coming
. H- y3 W' ?$ V& l3 pyears, which, along with improvements in affordability,
1 Q& R# N  Q% O2 A' jwill alleviate some of the pressure from overbuilding.
3 |5 j8 d. t, K0 o9 {% F* yOVERPRICED AND OVERBUILT: CANADIAN HOUSING
2 w6 v/ }( \4 k9 g/ l% ~0 wMARKET RETURNS TO FUNDAMENTALS
4 t% M2 D/ H, ~6 G1 {Grant Bishop, Economist
2 L9 U, f/ X' ?416-982-8063
8 r  F/ A8 K; nPascal Gauthier, Economist
416-944-5730

http://www.td.com/economics/special/gb0409_housing_exec.pdf

宋兵乙