Sales Commentary:
April was a record sales month for the Toronto Real Estate Board. May is also tracking for a record. There is little to gain in reporting the numbers. What is important is whether this burst of activity represents the peak to this market with a coming correction, or a new leg up to a longer market run. This frenzy has seen the Downtown Condo Market join the Detached Market, with multiple offers the norm, and selling prices 5-10% over list as the norm.

What are the signs of a market correction? First is a run up in prices (historically double digit increases over three consecutive years) which reduces affordability for buyers. Then there is a buildup of inventory - too many listings coming to market - many from investors. Now what do we have in today's condo market? A shortage of listings - the sale-to-listing ratio should be under 35% in a normal market and for April it was over 50%. In the area east of Yonge Street, where there is very little new product, the number was 75%! No wonder prices are up over 10% this year compared to price increases over the last few years that have averaged just under 5%.

To demonstrate this point, we looked at three sales of small units (first time buyers) in 2007. A one-bedroom without parking sold at 230 King St. E. for $220,000 in March. A year ago the same unit sold for $193,500. Another unit at 361 Front sold for $241,000 in March and the same unit went for $227,000 10 months earlier. Finally, a 600 sq.ft. unit at 77 Harbour Square sold in May for $281,000 and the same unit sold last September for $241,000.

So where are investors? Not in the resale market because renting right now is not attractive if you believe that condo prices are going to jump significantly. Investors are driving the new project market. They can buy units now with 15-20% down (as opposed to 25%), have no landlord issues, and wait as new developers from other markets enter Toronto on the belief that we are 'cheap' at prices of $400 per sq.ft. New projects, starting with the Shangri La, are going to range from $500 at the bottom to $1,000 per sq.ft.

What to do? There is NO market correction coming in the next two/three years. Prices are only going to go up. If you want a condo to live in, then buy now. If you are thinking about selling, you will get top dollar and have the chance to transition into what you really want. For investors, the future will be a lot more complicated than before, when you could buy anything and watch it appreciate. Now selectivity will be the key.

Rental Commentary:
April is the start of the rental season. 194 one-bedroom units were rented at an average of $1500. The range was from a low of $1150 without parking to $2800. Two-bedroom units averaged $2000, with a range of $1450 to $3800. There were 99 units leased - a big month. We continue to get requests for three-bedroom units. Only three leased in April - all townhouses from $1900 to $2400. With three-bedroom condos selling for about $600,000, there is little economic rational in renting them, as there are few buyers at $4000 per month.

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