Not All Real Estate Markets Are Created Equal
The Vancouver and Toronto real estate markets have become synonymous with high prices and intense competition. These conditions have only intensified during the pandemic, prompting many buyers to ditch their downtown dwellings in favour of larger, detached homes in rural areas that have traditionally been considered recreational property markets. But with rising interest come rising prices, leaving many buyers wondering how to avoid overpaying for a cottage as they try to escape the high prices of the big city. This shift in buyer preferences has made way for another emerging trend: real estate agents transacting outside of their local area, and in many cases, outside of their element.
It begs the question: are all real estate agents created equal?
Yes, when it comes to the rules and regulations they need to abide by, but not when it comes to navigating the subtleties of local real estate markets, says Christopher Alexander, Chief Strategy Officer and Executive Vice President at RE/MAX of Ontario-Atlantic Canada. He’s seen transactions by out-of-town agents increase exponentially over the last 18 months in markets surrounding the GTA. In Haliburton, for example, approximately 70 to 80 per cent of property showings are happening to Greater Toronto Area realtors and their clients.
Pitfalls of Using an Out-Of-Town Agent
- No access to local real estate board data, which is important in helping to guide homebuyers on price.
- No local market knowledge. Are listings moving quickly, priced appropriately and more importantly, is there a history with the property or area that the buyers should know about?
- Unaware of the nuances involved in getting their clients the best deal.
How to Avoid Overpaying for a Cottage
“Buyers likely don’t have to bid as high as they do, and their agents don’t know better than to advise them otherwise,” Alexander says.
The 2021 RE/MAX Recreational Property Report examined 23 recreational property markets in Ontario. Brokers in 20 of these markets – or 87% of them – reported seeing an influx of buyers from the Greater Toronto Area. Many of them are accustomed to more competition, and frequently have more equity that allows them to make higher offers. This has shifted the market dynamics in some of these smaller regions, making multiple offers, bidding wars and over-asking offers more common.
The question is, is over-bidding even necessary in these more-remote, lower-priced areas? And if so, how much over? What are comparable listings selling for? What’s the competition like? And what else, beyond price, can the buyer do to sweeten their offer? These questions are all easily answered by a local real estate agent, but ask an out-of-town agent, and their guess is likely as good as yours, unless they have a connection in the local market.
GTA Buyers Impacting Ontario’s Cottage Markets
The influx of out-of-town buyers into Ontario’s recreational property markets has impacted local conditions, with some markets seeing an increase in average price in the triple digits between 2019 and April of 2021.
Our Local Brokers Say It Best:
“It’s been a frenzy with out-of-town buyers … Unfortunately, local people are now pushed out of the market, [it] will take five to seven years to catch up.” Cathy Pitts, RE/MAX Country Classics Ltd. in Barry’s Bay, Ontario
“We are experiencing a sellers’ market, fuelled in part by buyers from the GTA wanting to leave the city behind, in favour of somewhere more ecologically pleasing from which to live, work and play. We are experiencing the lowest inventory levels in decades, with average days on the market mostly tied to ‘hold-offer’ dates.” Chris McCormick, RE/MAX Four Seasons Realty Ltd. in Collingwood, Ontario
“Toronto [buyers] traditionally have stayed away from this area and it has always been our smallest market, however, since COVID buyers from Toronto area have more than quadrupled.” Kathy Dimaline, RE/MAX Grey Bruce Realty Inc. in Bruce Peninsula, Ontario
“First-time buyers are frustrated with the market in having to pay well above asking price, and with no or limited conditions to protect them in order to secure [a property]. Many local first-time buyers have dropped out and will wait and see what happens with the market before re-engaging.” Katie Rowe, RE/MAX Professionals North in Haliburton, Ontario
“[We’re experiencing] low inventory, lots of buyers overpaying for property, days on market are very short with mostly unconditional offers.” John Sallinen, RE/MAX Parry Sound-Muskoka Realty Ltd. in Parry Sound, Ontario
“GTA and Ottawa have been more strongly represented in [the Thousand Islands] recreational market than in the past. Inventory remains extremely low, average days on market is 15 days, and the strong seller’s market continues. Multiple offers on all types of properties are standard. Waterfront properties are in extremely high demand for both year-round and recreational use.” Rob Colangeli, RE/MAX Finest Realty Inc., Kingston, Ontario
Market conditions in the Bell River and Lake St. Clair area include “lack of inventory, and properties selling over asking with multiple offers. There’s a large influx of out-of-town buyers, for example, from the GTA. It seems many properties are being priced to create multiple-offer scenarios. Days on market are very low.” Glen Muir, RE/MAX Preferred Realty Ltd., Windsor, Ontario
Local Market Knowledge a Key Indicator of Professionalism in Real Estate Industry
“Buyers should tap into a real estate professional who is familiar with, and active in, the market where they plan to buy,” Alexander says. The importance of going local appeal aligns with a new RE/MAX survey gauging Canadians’ perception of real estate and agents’ professionalism, which found that 27% of respondents value “neighbourhood knowledge and expertise” when it comes to criteria for professionalism in the industry. This factor ranks behind honesty/transparency (52%), trustworthiness (39%) and effective communication skills (31%), but higher than effective negotiating skills (24%).
READ MORE: Canadian Real Estate Industry At A Critical Crossroads
