The Supply / Demand ratio increased so much that it screwed up my nice graph. I had to push all the historical data and labels down just to make space for the spike we had last month.

It's not so easy to understand what's going on in the market based on this graph. Let's also include more detail about both the supply and demand.

On the demand side, we still have significantly higher levels than usual. Most Marches see about 375 condos sold but this March we had 627 condos sell.

The result of such a strong demand is a significant reduction of the number of condos that are available for sale at any moment. Typically we have about 1080 condos available for sale in March but last month the figure was 407. Please note that I use the 'Active Listings' measurement for this analysis, there is also a 'New Listings' measurement but the former includes the impact of the sales to give an accurate impression of the true inventory at any moment.

So what impact does all of this have on prices? In one month, the median condo price in the downtown district increased from $485,000 to $542,000, about a 12% increase in 1 month. Looking back at the price increase since last March, we get about 32% for the year, amazing.

The real estate talk right now is all about what steps the government is going to take to try and control any further price increases. We think there are multiple strategies that are being considered:
= Vacancy Tax - other cities have implemented a vacancy tax of about 1% per year of the value for empty properties which can be found through a study of utility consumption
= Foreign Buyers Tax - As done in Vancouver, I think this will have less impact here in Toronto.
= Tighter Lending - either through CMHC or the banks, investors may require higher down payments or qualify at higher interest rates.

My concern with the government intervention is that they may have an unintentionally greater impact on condos vs homes. Very few homes are held by investors, the cash flow is so poor and the homes require so much maintenance and repairs, most investors prefer condos. So any strategy that attacks investment properties will effect condo prices more than homes.

With Foreign Buyers only believed to account for about 5% of Toronto purchases, that tax won't have much of an impact. Very few homes are vacant, and most of those are planned to be demolished for a new custom house so I don't think a Vacancy Tax will work.

I think the only effective strategy at controlling prices will come from CMHC and Bank lending requirements. They could raise the primary residence down payment from 5% to 10% and/or increase interest rate qualifications closer to 6%. Not that a Buyer would need to pay their mortgage at that rate but need to qualify for their mortgage at that rate. That would decrease the Buyer's budget and impact the broad market. If they don't do that, I don't think they will achieve their goals.

It's never been a better time to sell and it would be smart to beat the government intervention that's coming. We sincerely appreciate your business!

Stay On Top Of The Market, Subcribe To Our Monthly Report For Free!