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
unsustainable levels of building. Our view is that house
prices exceeded the value of housing that was justified by
3 V' r0 g) |( H2 Ofundamentals by approximately 9% nationwide. This
overpricing compelled a level of residential construction
that exceeded its fundamental-justified level by approximately
( @  b' ?4 l( |) `: o12%, an excess that was exaggerated in the past
; w7 _  C$ s3 J& cthree years.
! ?" h* e. @% T: {By “overpricing” we mean that prices detached from
1 |9 t! c4 [; b* y3 d8 x* X. ]their fundamentals, as witnessed by a steep erosion of
: L- ~. D0 n. z; z) D1 U2 W" Haffordability. The current unwinding of house prices reflects
, ?0 |! U; r2 j& a# o0 Jboth a cyclical downturn and a return of house prices
to fundamentally justified levels.
& L4 d3 J: R' c; W  C) CWe consider “overbuilding” of two forms: “demanddriven”
2 q' S; u' {) awhere homebuyers buy up too many houses and
9 G" h4 R* [$ o+ [% R8 J  F+ \1 M2 Ythat this demand cannot be sustained; and “supply-driven”
) P- n: |6 |6 H& T6 b8 z0 `# R9 bwhere builders accumulate excessive inventories. Although
! ^& ^8 w5 m, g! Bthere is evidence of both types, we contend that Canada’s
& P2 d* q& J" l0 ?4 j“overbuilding” was mainly of the first type, where
8 J+ t, u, h# e- W1 Ihomebuyers pushed homebuilding to an unsustainable pitch
- X8 d6 {4 q9 wthat 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
1 D* m7 D# p8 ]* K% qremain choppy and new residential construction will be
dampened, owing to this structural weakness. Construction
is now undershooting fundamentals and we expect this
* @, z6 G$ A  v6 g  w  lto persist over 2009 to 2011. We anticipate that nationwide
4 k' F/ {9 @  G& d0 [/ t6 {7 E  D0 Wresidential construction will fall further to around
125,000 starts over 2009 with a trough around 115,000 units
in the fourth quarter.
0 I" W* }( N- G* c$ K6 P1 C  p$ W6 iTo quantify the degree of overpricing and overbuilding,
2 C; B7 i0 X$ V# V: Z6 a! 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
' C6 j  Y3 F/ I# O* W$ |5 rvalues since house prices should track incomes over the
5 v* `/ O; G4 H4 G7 Xlong-run. Since homebuilders build to meet demand, we
: c% W$ A# A8 sregard housing prices and household formation as the drivers
' v/ x; p+ y; [  h. ?( W; W4 Jof residential construction.
% i1 C  [# J5 @1 uTo examine the degree of overbuilding, we employ a
3 ~4 G, v8 o0 p) c; y“counter-factual,” asking what level of residential construction
' ]9 \/ b" M% R) R+ twould 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.
* s, j1 S9 ^$ [0 L& {9 _Regionally, we see the greatest strains on the Prairies,
where housing demand will further contract under waning
4 \* V+ o9 |! w) {: Q( Z& mpopulation inflows. Saskatoon, Calgary and Edmonton are
already witnessing surges in their unsold new homes at the
very time that the resale market has swung into strong
  M! x# Y1 R+ o& L& F# Ybuyers’ territory. Homebuilding in the Atlantic provinces
$ R: O* _" F0 p: Ehas been relatively balanced but, while not plagued by structural
weakness, will be singed by the downturn nonetheless.
* H( p  _% \+ G/ B7 gQuébec 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
9 d" m" S, C7 g8 z; R8 brates. While Ontario homebuilding will reel from a
cyclical downturn, the degree of structural weakness appears
limited – with the important exception of the Toronto
/ p3 F: ?3 m) c3 t, acondo market. Both in Toronto and Vancouver, historically
high levels of apartment-style units presently under
construction mean that record numbers of condos will
* l0 }- S* g& u7 n/ ], |reach completion during 2009. If absorption rates fall, as
cyclical factors would indicate, condo inventories could
spike severely – particularly in Vancouver. However, while
3 o( {  O2 Y" G3 L" vresidential construction in B.C. will definitely droop, we
7 h7 K7 z0 a5 K& T0 x$ A4 B" c) X% B/ Yanticipate that the West Coast will continue to benefit from
inter-provincial and international migration over the coming
3 S- ~3 u- a3 uyears, which, along with improvements in affordability,
* e6 k  A+ e% x% Y+ ]will alleviate some of the pressure from overbuilding.
OVERPRICED AND OVERBUILT: CANADIAN HOUSING
MARKET RETURNS TO FUNDAMENTALS
, x' ^, j# o3 ^Grant Bishop, Economist
416-982-8063
Pascal Gauthier, Economist
3 m7 J4 b# }# K3 Z416-944-5730
+ p" C% j0 I3 q
http://www.td.com/economics/special/gb0409_housing_exec.pdf

宋兵乙