Most experts try to analyze the Toronto housing and condo markets on the basis of interest rates, affordability (incomes), and listing inventory. But they miss the key factor driving the Toronto market. The key factor is the 100,000 new immigrants to the GTA each year. They require approximately 40,000 new housing units a year. While these new immigrants don’t move into the new construction per se, they allow others to move out of existing units and into new ones. The track record of builders over the past ten years is that they tend to sell and build about 30,000 to 40,000 units each year. Given the shortage of land to build detached housing (and also the cost) it is not surprising that builders are turning to condo construction and the preferred location for most buyers is downtown. Thus downtown high rise construction of 15,000 units per year can be sustainable. So who is buying these pre-construction units? Believe it or not, it is almost 100% investors because the delivery time is now 4-5 years and end users are unable or unwilling to estimate their housing needs that far into the future. Even more surprisingly, these investors are from Asia and the Middle East and are paying ‘all cash’! So why are investors buying in Toronto? These investors are all about ‘wealth preservation’ and not about rate of return. Paying all cash will provide a return of 3-4% on their money and they feel very comfortable about the Canadian economy, currency, and Toronto as a great city in which to invest. As long as the long term trends don’t change, then we will continue to see these types of investors buying Toronto real estate.