A chill has fallen over cottage country in Canada.
After a record red-hot run over the past two years, prices for recreational real estate in the country are expected to fall 4.5 per cent in 2023 as market activity slows, according to a Royal LePage report out this morning.
With the exception of Alberta, all of Canada’s recreational markets are forecast to see a decrease in single-family home prices. Quebec and Ontario are expected to see the biggest drops, falling 8 per cent and 5 per cent respectively.
This is a big difference from what the recreational market experienced over the past two years. Last year aggregate prices for a single-family dwelling increased 11.7 per cent to $619,900. The year before they soared 26.6 per cent.
“After two years of relentless year-round competition, Canada’s recreational property markets have slowed and returned to traditional seasonal sales patterns,” Phil Soper, president and chief executive of Royal LePage said in the report.
Soper said the recreational property market is less sensitive to rising interest rates because buyers tend to put more money down and borrow less, but overall inflation and a “severe lack of inventory” have led to a slump in sales.
Another factor is a reversal of the pandemic exodus out of the cities. During COVID-19 lockdowns when offices closed, many Canadians used their cottage as a second home and worked from there. But with companies requiring employees back in the office at least a few days of the week commutes have become challenging.
“For many, living in cottage country full-time has lost its romantic shine, meaning we are back to viewing the cottage, cabin and chalet as a weekend and summer escape from urban living,” said Soper.
In Atlantic Canada, a “pandemic relocation hotspot,” 46 per cent of brokers said they were seeing a trend of homeowners returning to cities after relocating to the region and demand for cottage properties has decreased significantly.
“The multiple-offer scenarios and homes selling over-asking are not as common today as they were during the pandemic boom,” said Corey Huskilson, sales representative, Royal LePage Atlantic in South Shore, Nova Scotia.
Cottage prices in Ontario climbed steadily during the pandemic years, with the price for a waterfront property topping $1 million in 2022. This year prices are expected to fall by 5 per cent.
“After two years of historically high pandemic-driven sales, activity in the recreational market came to a comparative standstill in the last half of 2022. Rising interest rates, buyer fatigue, and lack of inventory all played a role,” said John O’Rourke, broker, Royal LePage Lakes of Muskoka.
O’Rourke expects activity to be more balanced this spring, with traditional cottage buyers coming back to a market where they don’t have to compete with “the investment-focused buyer, a prominent player during the pandemic boom.”
Alberta is the one area of the country bucking the trend. Last year the aggregate price for a recreational single-family home here climbed 13.3 per cent to $1,165,500 from 2021. This year that price is expected to rise to $1,171,328.
Next door to Banff National Park and the home of many luxury properties, Canmore is a significant driver of prices in Alberta.
While brokers here are seeing lower inventories, demand has remained stable.
Moreover, 65 per cent of the brokers surveyed said they were not seeing the trend of homeowners moving back to cities after relocating, another factor contributing to the supply shortage.
“Buyer demand for recreational properties in Canmore continues to be driven by retirees and Albertans living in the surrounding cities, as well as residents from Ontario and Quebec. As Canmore attracts many cash buyers, higher interest rates have had little impact on this market, a factor that has kept prices stable,” said Brad Hawker, associate broker, Royal LePage Solutions.
One bright spot for all you cottage owners out there. Despite the declines forecast this year, the national aggregate price will still be 32 per cent higher than in 2020, after two years of double-digit gains.