Real estate company Royal LePage has released its 2022 report on recreational properties. Company prediction: Cottage prices will continue to rise at a dizzying rate.
According to the report, the average price of a recreational property in Canada, which includes secondary properties, such as cabins, cabins, cabins and waterfront properties, will increase by 13% in 2022 to reach $640,710.
“The factors challenging the residential real estate market in Canada – chronically low supply and growing demand – are magnified in the recreational property segment,” said Phil Soper, president and CEO of Royal LePage, in The report. “The demand for recreational properties continues to far exceed inventory in many cottage regions across the country. Waterfront and mountaintop locations near cities are limited by nature, even in a vast territory like Canada, forcing buyers into multiple supply scenarios.
Ontario led the charge in 2021, recording the highest price appreciation for recreational properties in the country with a 34.6% increase over 2020. The average price of a recreational property in Ontario in 2021 was 653 $000. Royal LePage expects this figure to increase to $737,890, a 13% increase, in 2022.
A cottage on the water will cost you even more. In 2021, waterfront recreational properties in Ontario sold for an average of $888,000, second only to British Columbia, where prices soared above $2 million.
Year-over-year increase in the price of waterfront properties in Ontario
All Ontario cottage regions saw price increases in 2021, but some more than others. When it comes to waterfront properties, Land O’ Lakes, an hour north of Kingston, saw the biggest jump with a 60.7% increase, with the average price rising from $450,000 in 2020 to $723,000. in 2021. It was followed by Orillia, with a 51% increase, from $788,000 in 2020 to $1,190,000 in 2021, making it the most expensive cottage market in Ontario.
Although international travel is expected to resume this summer, demand for cottages continues to be strong as buyers seek vacation property to escape the city. “We’re early days, but we don’t see any impact, given the ability to travel, on the market so far,” says Susan Benson, a real estate broker in Muskoka.
Who are the buyers?
Millennials are in full force, she says, in both the residential and cottage markets. With the ability to work remotely, many are looking for out-of-town options. Baby boomers are also having a big impact on cottage real estate.
“People thought baby boomers would quietly downsize and head into the sunset. Well, that doesn’t happen,” Benson says. “They’re usually approaching retirement or are retired and…they take advantage of where they are, come into that market and buy their dream home, which may very well be on the water.”
According to the Royal LePage report, 36% of Ontario baby boomers plan to buy a new home in the next five years. Fifty-six percent of this group are considering buying in a resort area. This means that over the next five years, Ontario could see an additional 729,000 people enter the cottage real estate market.
Low inventories continue to drive prices up
A second factor driving up cottage prices is low inventory. Of the 151 real estate professionals surveyed in the Royal LePage report, 84% said their area had fewer recreational properties for sale this year than last.
According to Benson, at the end of March there were 95 waterfront properties available in the North Lakelands Real Estate Board region, which includes Algonquin Highlands, Bracebridge, Dysart et al, Georgian Bay Township, Gravenhurst, Highlands East, Huntsville, Lake of Bays, Minden Hills, Muskoka Lakes, Parry Sound, Severn and the Archipelago. This inventory is down 39.9% compared to the same period last year and 73.9% compared to March 2020.
Cottage owners have held on to their properties during the pandemic rather than selling. This caused multiple offer scenarios, with the selling price often eclipsing the asking price. According to the majority of real estate agents surveyed in the Royal LePage report, 75% of recreational properties in Ontario are selling above the asking price.
What’s not selling and why
As long as you implement the right strategy, there are few cabins that aren’t selling right now, says Benson. “We are seeing some properties not selling, but that is where the price they have selected is not aligned with what they are offering.”
Not all cottage regions in Ontario saw significant price increases in 2021. Haliburton County saw the smallest change, with the average waterfront price increasing 14% from $700,000 in 2020 to $801,000 in 2021. Royal LePage Lakes of Haliburton official broker Anthony vanLieshout says you should take this number with a grain of salt.
“If you have one or two big high-end sales, all of a sudden those numbers become part of it,” he says. “I don’t think Haliburton wouldn’t have enjoyed similar appreciation to any other cottage country. It is extremely robust.
vanLieshout began to notice some hesitation on high-end properties, however, especially those listed above $1.5 million.
“Low inventory, that will probably keep prices where they are, but interest rates can go up and gas prices… Now it’s $100 to and from the cottage,” he says. “I think we are going to see a stabilization. It may have already started.