From luxury properties to townhomes, the Canadian real estate market has witnessed tremendous growth since the onset of the pandemic. Across the country, sales activity and home valuations have been climbing at levels never seen before, buoyed by strong demand, low inventory, and historically low interest rates. This has included substantial price increases for cottage properties.
While cottage country markets across the country have typically witnessed high demand during the summer months, the pandemic created a demand for green space and liveable communities, meaning there was sustained interest throughout the year in rural communities.
It’s no surprise that with more people working from home, professionals set their sights on lakefront cottages, chalets in the mountains and cabins in the woods, away from the hustle and bustle of major urban centres. Homeowners cashed in on their big-city properties and used their high equity to outbid buyers and drive cottage prices up.
Prices for Cottage Properties in Canadian Real Estate Market Soar
Here are some figures of what homebuyers can expect to face as they seek shelter in Canada’s recreational property markets. A clear trend is forming coast-to-coast, with sharp decreases in total sales but a consistent rise in the sale price.
Kawartha Lakes, Ontario (May 2022 / year-over-year)
- Residential sales: -35.5%
- Median price for residential properties: +30.4%% to $806,000
Georgian Bay, Ontario (May 2022 / year-over-year)
- Residential sales: -33.9%
- Benchmark price for single-family homes: +17% to $804,800
Powell River Sunshine Coast, British Columbia (May 2022 / year-over-year)
- Residential sales: unchanged
- Average price of homes sold: +43.3% to $677,950
Prince Edward Island (May 2022 / year-over-year)
- Residential sales: -8.5%
- Average price of homes sold: +20.9% to $405,686
Lethbridge, Alberta (May 2021 / year-over-year)
- Single-detached home sales: -3.8%
- Average price of homes sold: +7.4% to $348,603
What is Causing Cottage Prices to Rise in Canada?
Cottage country is no longer just the focus of retirees searching for a quiet life in their golden years or families seeking fun in the summer sun. Young professional couples who only need a reliable Internet connection to work are a key driver of the cottage country housing market, whether in the Sunshine Coast or Atlantic Canada. The cottage becomes their primary residence, not a vacation home.
Prospective buyers seek out recreational markets for a lifestyle change. According to a Leger survey conducted on behalf of RE/MAX Canada, 75 per cent of Canadians living in recreational markets are happy with their quality of life.
One market that experts look to is the Muskoka region in Ontario. As a premier cottage hotspot in the Canadian housing market, trends in the Muskokas help determine the trajectory of the broader cottage market. The main issue in Muskoka, as in many recreation markets, is a lack of supply.
“Supply levels are still at historical lows, which means that if we see a continued moderation in sales activity, there is ample room for the market to absorb a welcome increase in available listings,” said Chuck Murney, the President of the Lakelands Association of Realtors, in a statement. “Prices are still trending near all-time highs but have begun to show signs of topping out.”
An Increase in Short-Term Rentals
With rising COVID cases and record delays at airports across the country, many Canadians are opting for a staycation over an international trip. This increase in local travel presents a short-term rental opportunity for many cottage owners. A rising trend amongst investors during the pandemic has been to purchase cottages to rent them out and capitalize on the increasing demand.
Experts believe that cottage owners who may have considered selling their property are holding onto their waterfront cottages to take advantage of the booming short-term rental market. Fewer properties enter the market, lowering supply and driving up the price.
What to Expect for Cottage Real Estate Moving Forward?
Experts believe prices are unlikely to return to pre-pandemic levels. Waterfront properties in Muskoka have skyrocketed at an annualized pace of 26.4 per cent to more than $1.2 million. Non-waterfront median prices jumped more than 17 per cent to $750,000.
Another trend in the Canadian housing market is rising interest rates. The Bank of Canada (BoC) is moving to fight inflation by hiking interest rates, which has helped cool off the housing market.
Time will tell how the interest rates will impact the cottage and recreation housing market and if the same trends impacting the non-waterfront market make their way to cottage country.
