TD Bank:OVERPRICED AND OVERBUILT: CANADIAN HOUSING

依勒特

During Canada’s “Housing Boom”, which ran roughly
, b* F5 a6 |' R2 B& ?- A2 C. Mfrom 2002 to 2008, unsustainable price increases drove
! i4 {3 H. G) @9 D! D8 kunsustainable levels of building. Our view is that house
  j' A) N) W, K! ~) @prices exceeded the value of housing that was justified by
$ a! t0 U' ]5 `& T, hfundamentals by approximately 9% nationwide. This
' k# b! [* S4 coverpricing compelled a level of residential construction
# [9 J0 a- u1 @that exceeded its fundamental-justified level by approximately
12%, an excess that was exaggerated in the past
8 C3 N) {  H+ Q& A7 Ethree years.
5 B# S$ [6 \* }$ |) VBy “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
- l. U; q0 r8 v# u4 e4 Gto fundamentally justified levels.
$ p, p3 b6 ~7 C: J  Z6 @0 VWe consider “overbuilding” of two forms: “demanddriven”
where homebuyers buy up too many houses and
that this demand cannot be sustained; and “supply-driven”
where builders accumulate excessive inventories. Although
there is evidence of both types, we contend that Canada’s
) L* `9 d/ c% g! |. g“overbuilding” was mainly of the first type, where
homebuyers pushed homebuilding to an unsustainable pitch
that is now being rapidly reined in.
While most markets won’t face U.S.-style overhangs,
6 t$ B( [+ N" i* L" g$ Ythe construction of too many new homes over the boom
means a deepened slump. This overbuilding will likely weigh
on markets over the next few years. Even as Canada recovers
from the cyclical downturn, house price growth will
remain choppy and new residential construction will be
dampened, owing to this structural weakness. Construction
is now undershooting fundamentals and we expect this
to persist over 2009 to 2011. We anticipate that nationwide
+ J0 b# p  C# V+ o7 @' g- cresidential construction will fall further to around
0 W- u) c9 |% T) p. E125,000 starts over 2009 with a trough around 115,000 units
: q5 u% s0 ], z# A8 z& I- M! n8 ]( Ein the fourth quarter.
/ Z- M1 g5 Y/ _7 ]) w. B& FTo quantify the degree of overpricing and overbuilding,
1 i: H/ W% p/ i2 e2 bwe first develop an empirical model, based on long-run
1 [6 [" w$ D; {fundamentals of house prices and housing starts in each
7 C' r7 B2 a: V3 L$ G9 ?/ [: Zprovince. Affordability is the key concept behind home
8 g* F, m  `4 N- y% k! Evalues since house prices should track incomes over the
long-run. Since homebuilders build to meet demand, we
regard housing prices and household formation as the drivers
of residential construction.
3 T8 y8 i. A$ k. vTo examine the degree of overbuilding, we employ a
, O) v$ ^9 D% L4 L. {“counter-factual,” asking what level of residential construction
2 Q# y2 Z3 j& Nwould have occurred if housing had been priced
optimally. We find that actual homebuilding exceeded this
fundamental-justified level by about 12%. Although new
units were being absorbed, homebuyers simply bought too
many houses at prices that exceeded fundamentals.
Regionally, we see the greatest strains on the Prairies,
. t, u: A  E( s# P. b0 Q( D% ywhere housing demand will further contract under waning
& j3 o8 v2 G, X: e" W1 M' qpopulation inflows. Saskatoon, Calgary and Edmonton are
4 b' B2 C5 j5 v( h  B( C" P) Zalready witnessing surges in their unsold new homes at the
very 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.
' z' ^1 k% v5 t6 @Québec shows signs of strain – especially given the
strange accumulation of unabsorbed multiples on l’Île de
& P8 B* H  j0 l" ZMontréal – but recent building has been relatively balanced,
given the province’s history of under-building and low ownership
( i) K! N0 B9 n! u) w& Zrates. While Ontario homebuilding will reel from a
4 v+ P5 a. U6 W7 h* Mcyclical downturn, the degree of structural weakness appears
8 d7 F8 R6 w0 u' Ilimited – with the important exception of the Toronto
condo market. Both in Toronto and Vancouver, historically
high levels of apartment-style units presently under
construction mean that record numbers of condos will
6 A& Q5 ]# N5 D! n# Z$ vreach completion during 2009. If absorption rates fall, as
cyclical factors would indicate, condo inventories could
1 q4 Z4 M- t0 m. p7 Gspike severely – particularly in Vancouver. However, while
residential construction in B.C. will definitely droop, we
! b9 `" U/ z) A; a* t8 Banticipate that the West Coast will continue to benefit from
inter-provincial and international migration over the coming
years, which, along with improvements in affordability,
3 ?" c3 a+ g2 Z0 _& m, gwill alleviate some of the pressure from overbuilding.
  h9 i; g5 m: R+ [OVERPRICED AND OVERBUILT: CANADIAN HOUSING
5 h7 V) ?& z1 g4 XMARKET RETURNS TO FUNDAMENTALS
, x; l( O$ ^! Z7 SGrant Bishop, Economist
9 X& u: ?0 l" J# b8 [3 z6 ?: D416-982-8063
  D4 S6 D( L" }Pascal Gauthier, Economist
/ C: ^+ r5 y* J) q9 ~2 g416-944-5730
9 k& E( V4 U1 B0 F/ O( c
http://www.td.com/economics/special/gb0409_housing_exec.pdf

宋兵乙