Real estate activity in Canada’s cottage country returns to seasonal norms after more than two years of pandemic-fueled exuberance

HIGHLIGHTS:

• After two years of intense competition, Canada’s recreational property markets have slowed & returned to traditional seasonal sales patterns

• Recreational properties in Canada are up 32% since the pandemic began in 2020

• The price of a home in Ontario's recreational regions is expected to decrease 5.0% in 2023 to $603,060

Following a period of relentless buyer demand and fast-rising home prices during the pandemic real estate boom, Canada’s recreational markets are anticipating more subdued activity levels and price declines in 2023.

According to the recently-released Royal LePage 2023 Spring Recreational Property Report, the aggregate price of a single-family home in Canada’s recreational regions is forecast to decrease 4.5% in 2023 to $592,005, compared to 2022, as activity in the market wanes. This is due to reduced demand as a result of economic uncertainty and a lack of available housing stock, which has helped to keep prices stable. Despite a modest decrease expected this year, the national aggregate price would remain more than 32% above 2020 levels, after two years of double-digit price gains in the country’s recreational real estate market.

In 2022, the aggregate price of a single-family home in Canada’s recreational property regions increased 11.7% year-over-year to $619,900. This follows year-over-year price gains of 26.6% in 2021. When broken out by housing type, the aggregate price of a single-family waterfront property increased 9.5% year-over-year to $736,900 in 2022, and the aggregate price of a condominium rose 16.6% to $432,000 during the same period.

“After two years of relentless year-round competition, Canada’s recreational property markets have slowed and returned to traditional seasonal sales patterns,” said Phil Soper, president and CEO, Royal LePage. “While interest rate hikes have less of an impact on the recreational market than homes in urban settings, because families typically put more money down and borrow less, general consumer inflation combined with a severe lack of inventory has dampened sales activity. Buyers who are active in today’s market appear willing to wait for the right property – a sharp contrast to what we experienced during the pandemic.”

While low inventory poses a challenge for buyers looking for that special cabin or lakeside cottage, the coinciding contraction in demand has resulted in a return to more normal market conditions.

“Recreational homebuyers tend to purchase for leisure and life-enriching purposes. Call it a want versus a need,” added Soper. “Unlike many city buyers who may need to acquire a principal residence quickly, secondary home purchasers often have the benefit of time to find the right property for their specific needs.”

Watch Royal LePage’s CEO Phil Soper comment on the spring recreational property market in a discussion with CP24 last week in the video below.

ONTARIO:

In 2022, the aggregate price of a single-family home in Ontario’s recreational property market increased 7.3 per cent year-over-year to $634,800, compared to 2021. During the same period, the aggregate price of a single-family waterfront property increased 8.9 per cent to $1,006,600, while the aggregate price of a condominium increased 15.1 per cent to $510,900.

“After two years of historically high pandemic-driven sales, activity in the recreational market came to a comparative standstill in the last half of 2022. Rising interest rates, buyer fatigue, and lack of inventory all played a role,” said John O’Rourke, broker, Royal LePage Lakes of Muskoka. “Early signs this spring point to a more balanced market where inventory levels and sales are trending in line with historical norms. Traditional cottage buyers – end users that plan on enjoying their property – are still engaged and seem eager to jump back into a market in which they are not competing with the investment-focused buyer; a prominent player during the pandemic boom.”

The aggregate price of a single-family home in Ontario’s recreational regions is forecast to decrease 5.0 per cent in 2023 to $603,060.

KEVIN BYLES’ THOUGHTS:

Glenhome Real Estate’s recreational property expert notes that CREA (Canadian Real Estate Association) reported in February that only 29 waterfront properties were sold in the Lakeland region, which includes cottage-heavy areas such as Muskoka, Haliburton, Perry Sound, and Georgian Bay. That represents a 62.8% drop in the market from last year.

The lack of sales is due in part to low inventory levels. There aren’t many waterfront properties on the market right now and this has kept cottage prices stable and protected from a price correction. However, the market could change this Spring as local agents anticipate a flood of new listings to hit the market.

With the pandemic subsiding and more people going back to the office, paired with higher interest rates, the demand for recreational propertied has waned coming out of 2022 moving into 2023. That said, the market is becoming more balanced between Buyers and Sellers. Now is a good time to consider recreational property.

For those looking at recreational property the ‘key’ consideration in this market should be affordability and value, which is primarily based on proximity to the GTA (commute time), local amenities (shops, services, medical, etc.), and the type of building and property (lake quality, access, amount of land and shoreline).

Here are some brief notes on some of the ‘cottage-heavy’ areas near the GTA:

Muskoka
- North of Barrie/Orillia starting at Gravenhurst representing a series of linked and land-locked lakes.
- Consists largely of luxurious cottages.
- Commute times will vary depending on location but typically about 2.5-3.5 hours
- Average price for waterfront property is about $1,700,000
- CREA recently reported that the area is low on inventory

Kawarthas
- Located northeast of the GTA, this area represents a chain of lakes that feed into the Trent
   Lakes system
- Average commute time from the GTA ranges from 1.5-3.5 hours, depending on location
- Average price ranges from $700,000 to $1,000,000
- The area is currently experience low inventory

Grand Bend
- Located north of London with lakefront properties along Lake Huron. Known for having great beaches!
- Average commute from GTA is about 2.5-3 hours
- In March this area has 39 waterfront listings available with an average price of about $1,000,000

Bay of Quinte
- West of Kingston this area is on a long and narrow body of water that is connected to Lake Ontario.
- Average commute from GTA is about 2.5-3.5 hours
- According to local real estate agents the area is witnessing an inventory uptick, reportedly up 20% since December 2022
- Pricing fluctuates but waterfront properties are typically about $800,000, dependant on many factors (lot size, location, waterfront, etc.)


Read More:
Royal LePage 2023 Spring Recreational Property Report
Royal LePage Blog: Real estate activity in Canada’s cottage country…
2023 Recreational Single-Family Home Price Forecast

Commentary by Kevin Byles, Sales Representative
Originally sourced from Royal LePage 2023 Spring Recreational Property Report