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
& S/ j! [, A+ b4 M) O9 Zunsustainable levels of building. Our view is that house
prices exceeded the value of housing that was justified by
fundamentals by approximately 9% nationwide. This
overpricing 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
5 L0 L, F$ \; E; [& F' M. j  ?; ^to fundamentally justified levels.
7 k! ~: h: }8 G& @0 |; j& ]4 l1 OWe consider “overbuilding” of two forms: “demanddriven”
! y* Q2 P5 ?  M. G$ W8 lwhere homebuyers buy up too many houses and
that this demand cannot be sustained; and “supply-driven”
; ~' r' {. w0 {1 P0 jwhere builders accumulate excessive inventories. Although
3 B- B: [0 h  {( Hthere is evidence of both types, we contend that Canada’s
“overbuilding” was mainly of the first type, where
; }; B; r+ P2 F5 S# H. s( l( O4 fhomebuyers pushed homebuilding to an unsustainable pitch
that is now being rapidly reined in.
While 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
on markets over the next few years. Even as Canada recovers
from the cyclical downturn, house price growth will
* g# w' T- k4 Y# G* Aremain choppy and new residential construction will be
dampened, owing to this structural weakness. Construction
is now undershooting fundamentals and we expect this
/ V0 O5 O: D' g9 U" y& Sto persist over 2009 to 2011. We anticipate that nationwide
; r. M# p) g0 w8 s' lresidential construction will fall further to around
125,000 starts over 2009 with a trough around 115,000 units
- n/ [) D4 |4 |6 J* q9 p: f; Z- @in the fourth quarter.
) O( |) @$ q8 ^6 ?4 ~To quantify the degree of overpricing and overbuilding,
8 M6 q: `& M) [# A! J% `; t* xwe first develop an empirical model, based on long-run
fundamentals of house prices and housing starts in each
province. Affordability is the key concept behind home
values since house prices should track incomes over the
7 M/ x+ v% M3 _- ^$ g% dlong-run. Since homebuilders build to meet demand, we
; l3 ^2 X" B( c" ]+ R# dregard housing prices and household formation as the drivers
. R) D9 L5 _- Z7 i, fof residential construction.
4 y* D% m8 p% M( s( c" ?8 y) _) sTo examine the degree of overbuilding, we employ a
* Y5 S4 ?6 U, V' y( y“counter-factual,” asking what level of residential construction
would have occurred if housing had been priced
optimally. We find that actual homebuilding exceeded this
' X  q8 ?' l2 j/ z8 xfundamental-justified level by about 12%. Although new
& ^# D9 O$ @' ?4 z' S# [units were being absorbed, homebuyers simply bought too
many houses at prices that exceeded fundamentals.
* S7 O1 G# a8 m6 ORegionally, we see the greatest strains on the Prairies,
$ k! q1 U' Z) M2 cwhere housing demand will further contract under waning
population inflows. Saskatoon, Calgary and Edmonton are
. z5 @) y* }5 u8 {- Z" u+ Ralready witnessing surges in their unsold new homes at the
very time that the resale market has swung into strong
6 d& z. h  D. O1 t( m9 Hbuyers’ territory. Homebuilding in the Atlantic provinces
* m, r: `: }0 r8 Q6 Xhas been relatively balanced but, while not plagued by structural
+ S- v; Z7 G  c& b8 Xweakness, will be singed by the downturn nonetheless.
Québec shows signs of strain – especially given the
strange accumulation of unabsorbed multiples on l’Île de
Montréal – but recent building has been relatively balanced,
given the province’s history of under-building and low ownership
3 s8 y1 q! z8 _) d! N3 arates. While Ontario homebuilding will reel from a
! x+ o! T2 [( I! m, Bcyclical downturn, the degree of structural weakness appears
limited – with the important exception of the Toronto
condo market. Both in Toronto and Vancouver, historically
8 S$ _! U3 D! thigh levels of apartment-style units presently under
construction mean that record numbers of condos will
) t% v2 e: Z9 V+ `+ E' xreach completion during 2009. If absorption rates fall, as
  h3 P5 g. m+ ^+ k; P& H$ vcyclical factors would indicate, condo inventories could
spike severely – particularly in Vancouver. However, while
  m3 N+ m4 y9 {# k1 qresidential construction in B.C. will definitely droop, we
anticipate that the West Coast will continue to benefit from
inter-provincial and international migration over the coming
1 ~4 X8 h) n% c! I/ Vyears, which, along with improvements in affordability,
will alleviate some of the pressure from overbuilding.
& d* ]0 f. n: T, U* ^) _; uOVERPRICED AND OVERBUILT: CANADIAN HOUSING
: |# A& ^& m4 Q. S" G8 OMARKET RETURNS TO FUNDAMENTALS
' R! B6 G: O/ h" _" f) [8 @Grant Bishop, Economist
416-982-8063
& A# H, }9 O- E: F  W( e5 APascal Gauthier, Economist
' C- V+ r% r$ L/ c3 r7 y# o5 b416-944-5730
7 z# t' l7 V7 g: R( k8 S
http://www.td.com/economics/special/gb0409_housing_exec.pdf

宋兵乙