TD Bank:OVERPRICED AND OVERBUILT: CANADIAN HOUSING

依勒特

During Canada’s “Housing Boom”, which ran roughly
. s- |' b3 w! z1 N4 \" J& ]* Rfrom 2002 to 2008, unsustainable price increases drove
0 ~* O/ D& J  vunsustainable levels of building. Our view is that house
) g  z: X1 ^/ V: a+ `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
! e% C" \* r$ e. {12%, an excess that was exaggerated in the past
three years.
% ?% t4 z( K5 K6 _' w7 FBy “overpricing” we mean that prices detached from
0 a2 w6 A" o7 k1 c: Mtheir fundamentals, as witnessed by a steep erosion of
$ F( k8 o; V  A: C* l5 Jaffordability. The current unwinding of house prices reflects
9 B2 @& F6 _8 L: `- Cboth a cyclical downturn and a return of house prices
to fundamentally justified levels.
9 b7 x3 p* _# D; ?. BWe consider “overbuilding” of two forms: “demanddriven”
where homebuyers buy up too many houses and
that this demand cannot be sustained; and “supply-driven”
: R: u9 f1 u  M4 {* rwhere builders accumulate excessive inventories. Although
8 v% }) ]$ s% N9 Z5 ^6 }1 Fthere is evidence of both types, we contend that Canada’s
“overbuilding” was mainly of the first type, where
8 R  j4 X" f# P/ v( Dhomebuyers pushed homebuilding to an unsustainable pitch
that is now being rapidly reined in.
6 ?3 a% h. [# R% B, v% u/ Q* PWhile most markets won’t face U.S.-style overhangs,
( Y/ W) W, ]# Vthe construction of too many new homes over the boom
6 ?5 E* w0 T3 ^9 ?" _5 J$ [means a deepened slump. This overbuilding will likely weigh
( X% B0 K' E: j8 e, r. o3 Won markets over the next few years. Even as Canada recovers
* N8 r5 x" y5 `2 @. Z0 nfrom the cyclical downturn, house price growth will
remain choppy and new residential construction will be
- y2 o9 k" i! p4 N" Gdampened, owing to this structural weakness. Construction
+ c8 g! v% f# f5 Tis now undershooting fundamentals and we expect this
& H/ `3 Z& `, H6 N8 o# i4 ato persist over 2009 to 2011. We anticipate that nationwide
3 e: F' X% G' Z* uresidential construction will fall further to around
% l: f0 E5 h5 h4 |) u0 h125,000 starts over 2009 with a trough around 115,000 units
in the fourth quarter.
To quantify the degree of overpricing and overbuilding,
7 Q& N' m  x3 y! T4 U; i/ Uwe first develop an empirical model, based on long-run
% m4 l% S7 W7 V3 `# Ufundamentals of house prices and housing starts in each
2 M$ I8 o: U; i5 O* f( oprovince. Affordability is the key concept behind home
( _. \0 B6 `$ mvalues since house prices should track incomes over the
long-run. Since homebuilders build to meet demand, we
3 S# M9 [3 i& P# J* ~7 J  Zregard housing prices and household formation as the drivers
% Y! x5 |* Z% Z) P+ jof residential construction.
To examine the degree of overbuilding, we employ a
“counter-factual,” asking what level of residential construction
1 H& ?/ ]& |# f3 ]9 Pwould have occurred if housing had been priced
/ Q. E' h' i1 m+ Foptimally. 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.
' O3 e3 _9 d: o( E0 f/ M# XRegionally, we see the greatest strains on the Prairies,
where housing demand will further contract under waning
population inflows. Saskatoon, Calgary and Edmonton are
* [4 V, c% W$ L+ \; C7 halready witnessing surges in their unsold new homes at the
' s, o- Q6 _% w# {' S) R% Avery time that the resale market has swung into strong
* N3 P4 A4 n& c6 F; w- N2 {! mbuyers’ territory. Homebuilding in the Atlantic provinces
- \8 D: h7 q" ~6 Lhas been relatively balanced but, while not plagued by structural
6 h/ F2 B$ M" D" `weakness, will be singed by the downturn nonetheless.
Québec shows signs of strain – especially given the
strange accumulation of unabsorbed multiples on l’Île de
/ O5 f  A, B. |% nMontréal – but recent building has been relatively balanced,
% L. c0 C. w8 _, pgiven the province’s history of under-building and low ownership
$ @7 D0 E- _3 @  Crates. While Ontario homebuilding will reel from a
8 `9 |; H8 t8 F0 scyclical downturn, the degree of structural weakness appears
limited – with the important exception of the Toronto
condo market. Both in Toronto and Vancouver, historically
# N- o+ u* S3 vhigh levels of apartment-style units presently under
# v$ e# ^5 m  i( p% g* i" |7 Vconstruction 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
anticipate that the West Coast will continue to benefit from
inter-provincial and international migration over the coming
) t& c! R. t; ~2 K9 _years, which, along with improvements in affordability,
- f6 H- O' ]2 f5 [. |7 ~/ K: @will alleviate some of the pressure from overbuilding.
OVERPRICED AND OVERBUILT: CANADIAN HOUSING
# Z; j- j, s, C9 d5 sMARKET RETURNS TO FUNDAMENTALS
0 x7 i; z# ?% p' h) r5 u# W% Y) @Grant Bishop, Economist
0 \% R: k$ \4 `7 B/ d0 p& @416-982-8063
Pascal Gauthier, Economist
' p8 O1 ^8 \# \! e, m416-944-5730
  ]6 Z( P2 A# n+ b7 u1 `
http://www.td.com/economics/special/gb0409_housing_exec.pdf

宋兵乙