Cottage real-estate outlook: Demand to outstrip supply (again)

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As skies brighten and days begin to warm, Canadians’ thoughts turn to visions of sparkling lakes, the call of the loon and the crackle of a family campfire. This was never more true than at the height of the pandemic, when city dwellers swarmed into the recreational property market like blackflies in June, driving up prices and diminishing an already scarce supply.

Even last year, cottage prices continued to rise. A new report from real-estate firm Royal LePage estimates that the aggregate price of a single-family waterfront property in Canada rose by 9.5 per cent over the year.

So what’s the outlook for buyers in 2023?

There will be no going back to pre-COVID prices, experts say. Royal LePage estimates the national average price for recreational properties in Canada has risen by almost one-third since 2019.

But many areas are expected to see a slight correction, partly due to rising interest rates. That’s the good news (for buyers), although demand is predicted to outstrip supply. More than two-thirds of respondents to the Royal LePage survey reported fewer properties available compared to typical pre-pandemic levels.

This trend mirrors the situation in the Greater Toronto Area, where average home prices had risen sharply to more than $1.2 million in 2022. They have dropped since, and are expected to rebound only slightly this year to about $1.06 million, according to the RE/MAX Toronto Housing Market Outlook 2023. The Toronto Regional Real Estate Board is estimating $1.14 million.

In Ontario’s coveted cottage country, however, premium properties will likely maintain their value.

“The Muskoka market is so different from other places. Over the last three years of COVID, our prices are up 30 per cent to 50 per cent,” says Jack Janssen, a real estate agent with Chestnut Park Real Estate Limited in Port Carling, Ont. While cautioning that it’s still too early in the season to make firm predictions, he believes prices are unlikely to change much “unless we get an influx of product.”

Some buyers are getting creative, Janssen says. “People are buying acreages up here, buying farms, buying on small lakes. They don’t necessarily have to buy a big fancy place just to keep up with the Joneses.”

I have dozens of very highly qualified buyers who are ready to jump on the right product when it comes available, but there's nothing available.

Jack Janssen, real estate agent

It’s still a seller’s market, but it’s a lot more balanced than it was a year ago, says Oliver Reprich, a broker with Bracebridge Realty in Bracebridge. “It was a frenzy during the COVID period; the peak was the beginning of 2022. Since then we’ve come down 17 per cent to 20 per cent, but now that has levelled out, and I think this year it will remain relatively flat.”

Outside the prime regions, the Royal LePage study predicts that the aggregate price of a single-family home in Ontario’s recreational regions will drop by 5 per cent in 2023, to $603,060. That’s good news for those interested in other areas like the Rideau Lakes.

Unlike urban homes, cottage properties do not tend to have predictable generational turnover cycles, Janssen says, and aging baby boomers will likely bequeath their vacation homes to their children rather than put them on the market.

“A cottage is a gathering place,” Janssen says. “A lot of people bought a cottage because they wanted to see their kids and grandkids more. All the kids grew up going to the cottage, and if the family can afford to keep it, they will. I have dozens of very highly qualified buyers who are ready to jump on the right product when it comes available, but there’s nothing available.”

“Most of the older cottages are mortgage-free,” Reprich points out, so stress-related sales are rare.

For those who are lucky enough to find themselves putting in an offer on a summer home, the best advice is to mine local knowledge. In the COVID-fuelled rush to buy property outside the city, some buyers who used their usual real-estate agents were taken by surprise by details that don’t usually arise in urban areas.

For instance, access may be limited, says Reprich: “If there’s a seasonal road, you may not be able to get into it for six months a year, and many of the roads are privately maintained, which is a hidden cost that you don’t see up front.”

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Also, city residents might not realize that the pleasures of cottage living are mainly squeezed into about 10 weeks of prime summer weather between Canada Day and Labour Day, or about two dozen precious weekend days. Janssen says buyers sometimes fail to realize how much they’ll be paying per usable day beyond the purchase price, mostly in taxes and maintenance (a new septic system starts at about $25,000), not to mention “the expense of water toys: boats, insurance and fuel.”

Potential purchasers also need to know about the likelihood of occasional flooding and difficulties with local municipalities, which can allow or refuse permission for upgrades such as docks, boathouses and bunkies.

One question buyers are asking now is whether the neighbours are renting out their properties, Janssen says, since it’s no fun to have a party palace next door when you just want some peace and quiet.

“The buyer has to realize that they are going to have to give and take,” he says. “Of the 10 things they ‘have to have,’ they will maybe get five or six of them.”

But when you’re finally watching a glorious sunset lighting up the lake, it will probably all be worth it.

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