TD Bank:OVERPRICED AND OVERBUILT: CANADIAN HOUSING

依勒特

During Canada’s “Housing Boom”, which ran roughly
; _5 p! ^3 @0 t- Mfrom 2002 to 2008, unsustainable price increases drove
$ A3 z$ ]! X8 c8 B1 Dunsustainable levels of building. Our view is that house
, V) U, S! ~% {$ Gprices exceeded the value of housing that was justified by
fundamentals by approximately 9% nationwide. This
overpricing compelled a level of residential construction
2 S% W  j: I3 M8 othat exceeded its fundamental-justified level by approximately
12%, an excess that was exaggerated in the past
. q' R% w# Y7 G2 p5 Rthree years.
By “overpricing” we mean that prices detached from
their fundamentals, as witnessed by a steep erosion of
. T# r; G! a. _affordability. The current unwinding of house prices reflects
) S* z7 x6 Q( I6 V- t3 zboth a cyclical downturn and a return of house prices
! b8 k# i* G* @5 Z+ l  \* wto fundamentally justified levels.
5 n& {2 v+ z  W& a- R# T: _We consider “overbuilding” of two forms: “demanddriven”
. @: V* g' \* j% ~; m3 z$ y. h2 v1 @where homebuyers buy up too many houses and
that this demand cannot be sustained; and “supply-driven”
where builders accumulate excessive inventories. Although
% z- R" u8 M9 Q2 m% {) v8 u3 _' v! X+ cthere is evidence of both types, we contend that Canada’s
“overbuilding” was mainly of the first type, where
& s  p: j. B# f2 }homebuyers pushed homebuilding to an unsustainable pitch
" ^  J+ |4 X, xthat is now being rapidly reined in.
& X6 S) A- H" h4 p. O7 aWhile most markets won’t face U.S.-style overhangs,
the construction of too many new homes over the boom
: C! b7 N( T, Y/ `% qmeans 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
. Y4 h0 c* ~  kremain choppy and new residential construction will be
3 s6 p6 L2 `% h. q0 I7 c+ C) p- @" Zdampened, owing to this structural weakness. Construction
is now undershooting fundamentals and we expect this
to persist over 2009 to 2011. We anticipate that nationwide
( \, k$ Q% x2 g% ^' k* Nresidential construction will fall further to around
125,000 starts over 2009 with a trough around 115,000 units
6 ^/ u, {9 U! ~9 |) @% R1 c! Pin the fourth quarter.
To quantify the degree of overpricing and overbuilding,
* `2 a5 h: a6 j, S2 M, K0 Lwe first develop an empirical model, based on long-run
4 l. S! R  O6 Z6 R" L$ M' L9 Xfundamentals of house prices and housing starts in each
+ t# Y3 Y0 |8 G8 K% Z5 D+ P  W# Eprovince. Affordability is the key concept behind home
values since house prices should track incomes over the
long-run. Since homebuilders build to meet demand, we
8 S9 n; _! Q3 d6 R2 B5 u; j& i! Lregard housing prices and household formation as the drivers
of residential construction.
9 T) |5 |+ `/ L; n/ z7 W/ A+ pTo examine the degree of overbuilding, we employ a
4 V, l. F# S7 k* r“counter-factual,” asking what level of residential construction
& U! [6 K; B# h# Q- zwould have occurred if housing had been priced
" c9 D5 z9 {5 M* Qoptimally. We find that actual homebuilding exceeded this
fundamental-justified level by about 12%. Although new
units were being absorbed, homebuyers simply bought too
; Z# b7 q1 Z" V3 [/ {many houses at prices that exceeded fundamentals.
1 _5 U: b3 X$ k) [) K+ p4 t5 oRegionally, we see the greatest strains on the Prairies,
5 q5 G  {' W- J+ G% `) L* Z4 ewhere housing demand will further contract under waning
population inflows. Saskatoon, Calgary and Edmonton are
( |& L9 q1 a& o# B1 D6 salready witnessing surges in their unsold new homes at the
* r3 J9 T4 g. u( t4 dvery 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
2 M0 E, ]% \, tweakness, will be singed by the downturn nonetheless.
+ M7 i1 ^; |; ?/ sQuébec shows signs of strain – especially given the
; h+ a' U/ e0 R( \: nstrange accumulation of unabsorbed multiples on l’Île de
  R1 u6 E; ]4 Z8 jMontréal – but recent building has been relatively balanced,
9 N" V( I* a: O- _0 Xgiven the province’s history of under-building and low ownership
1 N/ @& p) O2 v: Z- O7 Y& frates. While Ontario homebuilding will reel from a
cyclical downturn, the degree of structural weakness appears
8 L' J9 R! c! Q3 T& |( |limited – with the important exception of the Toronto
condo market. Both in Toronto and Vancouver, historically
high levels of apartment-style units presently under
, A% u+ i. L# w1 n% C4 a: W" tconstruction mean that record numbers of condos will
* ~- E' E" j( ?  ~! C0 r) Ureach completion during 2009. If absorption rates fall, as
* J. k. t. s, ecyclical factors would indicate, condo inventories could
0 f9 ^8 ^( u. Q: I5 ~" ispike severely – particularly in Vancouver. However, while
/ a# U' x( M$ U! Sresidential 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
: z$ l6 U+ V/ B3 u& `: e9 @# ^years, which, along with improvements in affordability,
will alleviate some of the pressure from overbuilding.
5 K7 s( _3 N5 \) a) }2 `0 ZOVERPRICED AND OVERBUILT: CANADIAN HOUSING
9 M) ^# m- o& g0 jMARKET RETURNS TO FUNDAMENTALS
, h! S3 `* r# hGrant Bishop, Economist
416-982-8063
# d. n, {; N4 m. \' C; [Pascal Gauthier, Economist
; ~. Y$ S0 d5 U( d9 Q0 d# w4 X416-944-5730

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

宋兵乙