Some kinds of luxury cottages see 'big correction' as market stabilizes

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After a year of softening prices – and with the COVID-19 feeding frenzy in the rear-view mirror – Canada’s luxury cottage market is returning to business as usual.

“COVID drove every segment [of the market] up,” says Chris Alexander, president of Remax Canada. “And then we took the bulk of the correction last year.”

That meant cottage prices fell significantly due to lower demand and more economic uncertainty, according to Remax’s 2023 Cottage Trends Report.

Areas with the biggest declines in prices between the first quarters of 2022 and 2023 were:

• Kenora, Ont., -59.9%
• Haliburton, Ont., -26 %
• Windsor-Essex, Ont., -23%

Regions with the biggest drops in sales during the same period:

• Haliburton, Ont., -57.8%
• Canmore, Alberta, -49.7%
• Peterborough and the Kawarthas, Ont., -48.4%

In the luxury market, however, price changes have been less noticeable. That’s because those buyers and sellers often don’t have the same financing constraints.

“They don’t march to the same drum as the rest of the market,” Alexander says. “They’re typically more insulated from outside economic pressures, such as a weakening economic climate and interest rate hikes.”

As a result, while high-end cottages may sit longer on the market and see fewer offers than less-expensive properties, they continue to sell well and are a solid investment, he says.

“Owning a cottage is a big part of the Canadian dream,” says Alexander.

Luxury market less affected

At the moment, sellers of recreational properties in general are quite firm on prices, largely because it was a seller’s market for the past three years. On the other hand, buyers are cognizant the market has changed and are looking for a deal, says Alexander.

As well, high-end cottages over $5 million are sitting for longer periods of time, often two to three times as long as properties selling for less.

Heather Scott, a broker in Bala, Ont., in the Muskoka region says that a sense of normalcy is returning to the luxury cottage market after the craziness of the past few years.

“During COVID people were buying swampier waterfront – it didn’t matter,” she says. Now buyers are looking for quality waterfront, private lots, decent road access and good exposure. “Waterfront has a lot of good long-term value,” she says, adding that Muskoka is still hot among purchasers.

What has seen less activity are island properties. “Small lakes and islands take the biggest hits,” says Scott. “Island sales have taken a big correction.”

In terms of buyers, Remax’s Cottage Trends report finds that the bulk of “buyers” are Gen X-ers who stand to inherit from their baby boomer parents. “They’re trying to keep them in the family,” says Alexander.

On the seller side, 42 per cent of cottage owners are deliberately waiting to sell, to have the opportunity to pass it down to younger generations, according to the report. And 74 per cent of cottage owners believe they will be able to successfully pass down their property, with the help of a financial advisor.

The forecast

Families realize the value of their recreational properties, Alexander says, not just in enhancing their quality of life but also in holding value over the long term.

While cottages come with higher-than-average operating costs due to inclement weather, maintenance and reduced local infrastructure, their stable values in Muskoka, Whistler, Squamish, Mont Tremblant and other areas make them attractive, he says. “They’re a little bit riskier than a normal investment property, but they can still be great investments,” Alexander says.

He foresees a lot of demand in the Ontario communities of Georgian Bay and Haliburton as well as Revelstoke, B.C., in the coming months. “In Revelstoke there’s been a big explosion – there are a lot of projects happening right now.” Overall, the national average price in recreational markets is expected to rise just 0.9 per cent in 2023, according to Remax.

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One area Alexander predicts will cool is the short-term rental market. He says families who bought during the pandemic and are renting out their properties over the peak season saw less activity this past summer. “The return of travel really affected the short-term rental market,” he says, adding there were fewer renters for higher-end cottages.

But overall, the forecast for luxury sales is business as usual, he says. “There’s always extra security in that market,” he says.

Scott agrees. “People don’t sell their Muskoka waterfront unless things get really bad,” she says. “I think we will see people hang on to their properties.”

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