Real estate company Royal LePage has released its 2022 Recreational Property report. The company’s prediction: Cottage prices will continue to increase at a dizzying pace.
According to the report, the average price of a recreational property in Canada, which includes secondary properties, such as cottages, chalets, cabins, and waterfront properties, will increase by 13 per cent in 2022 to $640,710.
“The factors challenging Canada’s residential real estate market—chronic low supply and growing demand—are amplified in the recreational property segment,” said Phil Soper, president and CEO of Royal LePage, in the report. “Demand for recreational properties continues to vastly outstrip inventory in many cottage regions across the country. Waterfront and mountain-top locations near cities are limited by nature, even in a vast land like Canada, forcing buyers into multiple-offer scenarios.”
Ontario led the charge in 2021, recording the country’s highest recreational property price appreciation with a 34.6 per cent increase from 2020. The average price for an Ontario recreational property in 2021 was $653,000. Royal LePage predicts that number will jump to $737,890—a 13 per cent increase—in 2022.
A cottage on the water will cost you even more. In 2021, recreational waterfront properties in Ontario sold for an average of $888,000, second only to British Columbia, which saw prices soar above $2 million.
YOY increase of waterfront property price in Ontario
All of Ontario’s cottage regions saw a price hike in 2021, but some more than others. When it came to waterfront properties, the Land O’ Lakes, an hour north of Kingston, saw the biggest jump with a 60.7 per cent increase, the average price rising from $450,000 in 2020 to $723,000 in 2021. This was followed by Orillia, with a 51 per cent increase from $788,000 in 2020 to $1,190,000 in 2021–making it the most expensive cottage market in Ontario.
Even with international travel expected to pick up this summer, cottage demand continues to be strong as buyers look for a vacation property to escape the city. “It’s early days, but we are seeing absolutely zero impact, given the ability to travel, on the market so far,” says Susan Benson, a real estate broker in Muskoka.
Who are the buyers?
Millennials are out in full force, she says, in both the residential and cottage markets. With the ability to work remotely, many are looking for options outside of the city. Baby boomers are also having a significant impact on cottage real estate.
“The thought people had was that baby boomers were going to quietly downsize and head off into the sunset. Well, that’s not happening,” Benson says. “They are typically approaching, or into retirement and…they are cashing out of wherever they are, coming to this market, and buying their dream home, which may very well be on the water.”
According to the Royal LePage report, 36 per cent of Ontario’s boomers are considering purchasing a new residence within the next five years. Fifty-six per cent of that group is considering buying in a cottage region. That means that over the next five years, Ontario could see an additional 729,000 people enter the cottage real estate market.
Low inventory continues to drive up prices
A second factor driving up cottage prices is the low inventory rates. Out of the 151 real estate professionals surveyed in the Royal LePage report, 84 per cent said that their region has fewer recreational properties for sale this year than last year.
According to Benson, as of the end of March, there were 95 waterfront properties available in the Lakelands Real Estate Board North area, which includes Algonquin Highlands, Bracebridge, Dysart et al, Georgian Bay Township, Gravenhurst, Highlands East, Huntsville, Lake of Bays, Minden Hills, Muskoka Lakes, Parry Sound, Severn, and The Archipelago. That inventory is down 39.9 per cent compared to the same time last year, and down 73.9 per cent compared to March 2020.
Cottage owners have held onto their properties during the pandemic rather than selling. This has caused multi-offer scenarios, with the selling price often eclipsing the asking price. According to the majority of real estate agents surveyed in the Royal LePage report, 75 per cent of recreational properties in Ontario are selling above asking price.
What isn’t selling and why
As long as you implement the right strategy, there are few cottages that won’t sell right now, Benson says. “We are seeing some properties not sell, but it’s where the price they’ve selected is misaligned with what they’re offering.”
Not all Ontario cottage regions saw major price jumps in 2021. Haliburton County recorded the smallest change with the average waterfront price rising 14 per cent from $700,000 in 2020 to $801,000 in 2021. Anthony vanLieshout, the broker of record for Royal LePage Lakes of Haliburton, says you should take this number with a grain of salt.
“If you have one or two high-end, big sales, all of a sudden those numbers become a portion,” he says. “I’m not of the mindset that Haliburton wouldn’t have seen similar appreciation to any other cottage area. It’s exceedingly robust.”
vanLieshout has, however, started to notice some hesitation on high-end properties, particularly the ones listed for over $1.5 million.
“Low inventory, that’ll probably keep the prices where they are, but interest rates may be going up and gas prices…Now it’s $100 to go to the cottage back and forth,” he says. “I think we’re going to see a stabilization. It’s maybe already started.”