Tag: cottage real estate

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Cottage Life

CREA announces pilot project that will show buyers bids in real-time

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The Canadian Real Estate Association (CREA) is launching a pilot project that will allow buyers to see registered offers placed on a property as they are submitted.

In partnership with Australian software company Openn Negotiation, CREA, which is in charge of setting national standards for Canadian realtors, has created Openn Offers; a management software that will track real estate offers in real-time, displaying them on a property’s REALTOR.ca listing.

The goal of Openn Offers is to increase transparency and provide buyers with more information when purchasing a property, says Pierre Leduc, media relations spokesperson for CREA. The project is still in the planning process, but Leduc says the association’s aim is to test Openn Offers in select markets across Canada this summer.

Which markets will be selected is still up in the air. Since Canadian real estate is governed at a provincial level each province has its own rules around how a real estate transaction is conducted and what information is allowed to be disclosed. CREA is currently in talks with 11 real estate regulators across the country to determine how Openn Offers will operate in each province.

“Our first step is to define the provincial [regulations] that actually allow this project to be more transparent,” Leduc says. “Then it’s finding boards within the province that are willing to host.”

If Ontario is selected as a host, Leduc says that at a minimum, Openn Offers will show buyers how many offers have been made on a property and what the highest offer is. A recent announcement made by the Ontario government could expand these parameters, though. As of April 1, 2023, sellers in Ontario will have the option to disclose offer amounts in a multi-offer scenario. This option will be voluntary, but it could give buyers a sense of where they rank among the bids and ensure they don’t overpay for the property. This feature wouldn’t kick in on Openn Offers until next year.

Leduc adds that for an offer to be recognized by Open Offers, the buyer needs to be working with a licensed realtor who can process their bid through the system.

CREA’s announcement came only a week after the federal government released its 2022 Budget, in which the feds pledged to eliminate blind bidding from real estate transactions in an effort to make housing prices more affordable.

Blind bidding is the default practice used by real estate agents across Canada in multi-offer scenarios. It requires buyers to bid for a property without knowing the amout of competing offers—a common scenario seen in Ontario’s cottage country over the last two years. The crackdown on blind bidding comes after some critics have pointed to it as a culprit in driving up real estate prices. But Katie Steinfeld, broker of record for real estate agency On The Block, disagrees.

“There are situations where one buyer will significantly overpay versus everybody else, and in those situations, I would say for sure that will not help decrease prices.” But this tends to be an exception, Steinfeld says. On The Block operates its own auction platform, providing similar information to what Openn Offers plans to disclose. When the size of competing bids are disclosed in auctions, Steinfeld says she found that prices jumped higher.

“A lot of buyers, their argument is when they’re in a blind bidding situation, they don’t want to go up any higher because they don’t know what the next highest offer is. They don’t want to overpay,” she says. “But if they know what they need to pay in order to get the home, that can push them up even higher.”

Steinfeld says she doesn’t believe eliminating blind bidding will suddenly tame Ontario’s runaway real estate prices, but she does think that CREA’s attempt to provide buyers with more information is a step in the right direction.

“I don’t think this will have an immediate impact. I think opening things up and making things more transparent is going to be a process. But I think it will start helping [the market] out and bring more opportunities and options to buyers and sellers,” she says. “Having more information at their disposal is always a good thing.”

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Cottage Life

Critics of Ontario’s new open bidding policy say it will do little to curb prices

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Ontario’s soaring cottage real estate prices may finally see some friction. The province’s Ministry of Government and Consumer Services is rolling out new regulations that will allow people selling their properties to disclose the details of competing offers.

Currently, the Trust in Real Estate Services Act, 2020 (TRESA), forces buyers in a multi-offer scenario to submit a bid without knowing how much competitors are offering, otherwise known as blind bidding. This practice forces buyers to guess what they should offer; in some cases paying thousands of dollars more than the next highest bid.

Over the last two years, multi-offer scenarios have become common in cottage country fueled by high demand being driven by low mortgage rates and an urban exodus during the pandemic. The new TRESA regulations give sellers the option to opt-in for an “open-offer” process, disclosing details of competing bids.

“Sellers will no longer be limited to selling their property through a closed or traditional offer system,” said minister of government and consumer services, Ross Romano, in a statement.

Ontario Real Estate Association (OREA) CEO, Tim Hudak, voiced his approval of the new regulations, saying in a statement that it will make the buying process more transparent while giving homeowners a choice of how they want to sell their properties.

Some critics, however, are saying that by empowering the sellers with the choice to disclose offer details, the new regulations will do little to curb prices. “Home sellers shouldn’t be able to pick and choose when the bidding process is transparent and when it is blind. That defeats the purpose of ending blind bidding since it’s in sellers’ best interest to keep buyers in the dark,” said Ontario’s Green Party leader Mike Schreiner in a statement.

“A consistently transparent bidding process will help bring down the skyrocketing price of houses, and along with other key policies, like expanding zoning and investing in affordable rentals, will help us build an Ontario where everyone has an affordable place to call home.”

The Ontario government announced its “open-offer” alternative just a few weeks after the federal government released its 2022 Budget, which tasked minister of housing, Ahmed Hussen, with creating a Home Buyers’ Bill of Rights. As part of the bill of rights, Hussen will work with each province and territory to end blind bidding and make housing more affordable. It’s uncertain whether Ontario’s new TRESA regulations will meet the bill of rights’ requirements.

The new TRESA regulations are set to take effect on April 1, 2023. On top of providing the “open-offer” alternative to blind bidding, the government is also introducing a new code of ethics for real estate brokerages, brokers, and salespersons, improving professionalism and disclosure obligations.

As part of this process, the Real Estate Council of Ontario (RECO), which is in charge of regulating real estate professionals on behalf of the provincial government, will provide buyers and sellers with a fact-based information guide detailing their rights and options. The government is also expanding RECO’s disciplinary scope to encompass all aspects of the TRESA.

“By giving RECO these powers, we’re streamlining and speeding up the process needed to resolve issues and ensure real consequences for those acting in bad faith,” Romano said.

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Cottage Life

How the federal government’s affordable housing strategies will affect buyers and sellers

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On April 7, the federal government released its 2022 budget, which included strategies designed to tackle Canada’s housing crisis, including the lack of affordable housing. Low inventory combined with high demand has driven up housing prices across the country, says a Royal LePage report. In the first quarter of 2022, the price of a single-family home in Canada increased by 25.1 per cent to $856,900.

The cottage market has seen similar effects. In 2021, the national aggregate price of a single-family waterfront home jumped 21.5 per cent to $976,000, according to a Royal LePage report.

“Young people cannot imagine being able to afford the house they grew up in,” reads the 2022 budget. “Foreign investors and speculators are buying up homes that should be for Canadians to own. Rents in our major cities continue to climb, pushing people further and further away from where they work.”

To fill the housing demand, Finance Canada and the Canada Mortgage and Housing Corporation estimate that the country will need to build 3.5 million new homes by 2031. To achieve this goal, the federal government has committed $72 billion in financial support over the next six years towards its affordable housing plan.

The plan’s strategies range from a Home Buyers’ Bill of Rights to tax credits for first-time home buyers. But not everyone’s convinced these strategies will accomplish the federal government’s goal of making housing more affordable.

“[The plan] will not lower housing prices,” says Frank Clayton, a professor at the Toronto Metropolitan University’s Centre for Urban Research and Land Development, in an email. “The best they can do is to slow down price growth over a longer term.”

Clayton does, however, say that he thinks the budget’s Housing Accelerator Fund could be effective. The fund commits $4 billion over the next five years to support the housing development needs of municipalities. How municipalities use the money is flexible, but the goal of the fund is to create 100,000 new housing units over the next five years.

The budget includes a long list of other strategies. To get a better understanding of how the government’s plan will affect buyers and sellers, here’s a breakdown of the key strategies:

A tax-free first home savings account

The budget will introduce a tax-free savings account to help Canadians with the down payment on their first home and ultimately create a more affordable housing strategy. The account will function similar to an RRSP with tax-deductible contributions, and, similar to a TFSA, withdrawals will be non-taxable.

Prospective first-time home buyers will be able to save up to $40,000, with an $8,000 maximum annual deposit. The federal government says it plans to launch the Tax-Free First Home Savings Account in 2023.

Doubling the First-Time Home Buyers’ Tax Credit

On top of the tax-free savings account, the federal government has doubled the First-Time Home Buyers’ Tax Credit to $10,000 in an effort to assist with the significant closing costs associated with buying a home. The tax credit applies to homes bought on or after January 1, 2022.

Creating a Home Buyers’ Bill of Rights

The federal government has pledged to create a Home Buyers’ Bill of Rights to eliminate real estate practices it feels are driving up prices. This includes cottage real estate, not just homes. The two practices the government is targeting are buyers having to forgo property inspections to make their offers more desirable and blind bidding.

The federal government says it will work with provinces and territories to make home inspections a legal right while phasing out blind bidding altogether. Blind bidding is the default practice real estate agents use across Canada when they engage in a multi-offer scenario. It requires buyers to bid for a property without knowing the size of competing offers. In certain circumstances, it can cause a buyer to significantly overbid, inflating the property’s selling price.

But Katie Steinfeld, broker of record for real estate agency On The Block, says that eliminating blind bidding might actually drive up real estate prices. “A lot of buyers, their argument is when they’re in a blind bidding situation, they don’t want to go up any higher because they don’t know what the next highest offer is. They don’t want to overpay,” she says. “But if they know what they need to pay in order to get the home, that can push them up even higher.”

Steinfeld sides with professor Frank Clayton, saying that many of the federal government’s housing policies don’t speak to one another. If Canada wants to see affordable housing, it needs a lot more new inventory than what was proposed in the 2022 budget, she says, especially since the government has opened up its immigration policy and is planning to welcome over 400,000 new immigrants each year.

A two-year ban on foreign investment in Canadian housing

While foreign investment doesn’t play a major role in cottage country, the federal government has argued that it is pricing Canadians out of homes in urban centres, such as Vancouver and Toronto. That’s why the 2022 budget proposes a regulation that would prohibit all foreign commercial enterprises and non-permanent residents from buying residential property for two years. It has yet to be announced when this regulation would go into effect.

Steinfeld, however, argues that the federal government is aiming its restrictions at the wrong group. According to the Canadian Housing Statistics Program, 2.2 per cent of residential properties in Ontario were owned by non-residents in 2020, and 3.1 per cent in B.C. Whereas multiple-property owning Canadians made up 31 per cent of Ontario’s residential real estate market in 2020 and 29 per cent in B.C., with many of the properties used as rentals.

“That is much more significant than the foreign investment piece,” Steinfeld says. “I think that if they would have created policies to require increased down payment from [multiple-property owning Canadians], perhaps that might have had more of an impact versus just banning foreign buyers altogether.”

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Cottage Life

Interest rates just went up—here’s what it means for cottage country

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On April 13, the Bank of Canada raised its policy interest rate by half a percentage point to one per cent—the biggest increase since May 2000. The move comes after Canada’s inflation rate hit a 31-year high of 6.7 per cent.

“Much of the inflation we’re experiencing today is coming from international factors. The war in Ukraine has pushed commodity prices higher. It’s further disrupted global supply chains, and that’s the principal reason why our inflation forecast is revised up,” said Bank of Canada governor Tiff Macklem during a press conference.

Canada’s inflation target usually sits between one to three per cent. Six per cent puts us well over, causing the price of goods and services to go up. This is because inflation is caused by an inbalance between supply and demand. Throughout the pandemic, demand for certain commodities, such as oil, dropped, so there was less incentive to drill for new oil reserves, says Angelo Melino, an economics professor at the University of Toronto. “But when the world economy warmed up, we were caught with less [oil] supply than we’ve normally had.”

The same goes for other products. During the pandemic, everyone bought items they could use from home, such as Peloton bikes and free weights. But now people are returning to gyms, bars, restaurants, theatres, etc., resulting in service inflation, Melino says. The sudden shifts in demand cause supply chain constraints, which are now being exacerbated by the war in the Ukraine.

By raising interest rates, the Bank of Canada said it expects to reach its inflation target of two per cent by 2024. Higher interest rates discourage people from borrowing money, which reduces spending, slowing down the economy, and putting the brakes on inflation. The only issue is if the Bank of Canada raises interest rates by too much, Melino says, it can stop the economy from growing and create a recession. He expects the Bank of Canada’s policy interest rate to rise from one to two per cent over the next year.

This has a major impact on mortgage rates. When the pandemic first hit Canada in March 2020, the Bank of Canada slashed its policy interest rate to 0.25 per cent in an attempt to bolster the economy. Low mortgage rates combined with the ability to work remotely and the desire to escape urban areas made cottages hot commodities during the pandemic. This demand has driven up cottage prices. In fact, Royal LePage reported that the national aggregate price of a recreational property in 2021 jumped 27 per cent.

But rising mortgage rates are expected to cool the real estate market. “It doesn’t directly affect the housing market in the sense of prices, but it does affect the buying,” says Lisa Hannam, the executive editor of MoneySense. “We are currently in a seller’s market, so it does seem a little bleak if you’re trying to get into it.”

The tapering off of cottage prices won’t happen overnight. It’s expected to be a drawn-out process, which could lead to some disconnect between buyers and sellers. “We have sellers who are holding on to the 2020 and 2021 prices,” Hannam says, “and then you have the buyers who are thinking about 2023, 2024 prices. So, you’re probably going to negotiate a lot more than you expected.”

If you are planning to buy a cottage, Hannam says that you shouldn’t solely fixate on mortgage rates. “Always think about your long term goals, and don’t make emotional purchases. Look at the hard facts of buying real estate. There are things in addition to the mortgage and the down payment. You have to look at property taxes, maintenance, electricity, phone bills, cottage association fees, and cottages tend to be older than a primary residence, so there may be renovations,” she says.

“The mortgage rate changes will come into play, but don’t get sidetracked from the overall cost of a cottage.”

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Cottage Life

East Coast expected to see biggest cottage price hike in Canada in 2022

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Atlantic Canada’s cottage market is expected to remain hot in 2022. Tied with Quebec’s 15 per cent increase, the East Coast is predicted to have the highest recreational property price gain in Canada this year. That includes waterfront cottages, chalets, cabins, and even recreational land used for camper trailers. According to Royal LePage’s Recreational Property report, the average price in Atlantic Canada will rise from $237,000 to $272,550 in 2022.

Following the rest of the country’s cottage markets, the price of an East Coast cottage has been on the rise since the start of the pandemic. Closed borders compelled Canadians to look for domestic retreats, and since many cottage owners have held onto their properties throughout COVID, it has kept inventory low, driving up prices with multiple offers.

Nova Scotia’s market, in particular, has piqued the interest of buyers. Thanks to the province’s affordable prices, Nova Scotia has become a compelling location for Ontario and Quebec prospective owners who have been priced out of their local markets.

“It’s about 50/50,” says Corey Huskilson, a real estate agent in South Shore, N.S. “Maybe even more Nova Scotians, actually. But with regular residential homes, we’re seeing a lot more out-of-province buyers.”

Further out on the Atlantic coast, Newfoundland’s waterfront cottage market has also experienced a jump. Combined with Nova Scotia’s market, the two provinces saw a 39.3 per cent increase in the price of a waterfront cottage between 2020 and 2021, rising from $239,000 to $333,000.

Year-over-year increase of recreational property price in Nova Scotia in 2021

Nova Scotia’s waterfront properties were in demand in 2021. The Annapolis Valley, which is located between two mountain ranges on the western side of the province, near the Bay of Fundy, led the way with a 70 per cent increase. The average price of a cottage rose from $210,000 to $357,000.

Cape Breton, on Nova Scotia’s eastern coast, followed with a 31.6 per cent increase from $266,000 to $333,000. Finally, the South Shore, near Halifax, saw a 16.8 per cent price increase, jumping from $315,000 to $368,000.

Who are the buyers?

As Huskilson said, Nova Scotia’s cottage market has seen interest from both Ontario and Quebec, but that segment will likely taper off in 2022 due to the government introducing a new property tax and a deed transfer tax aimed at out-of-province buyers.

“People who have not just purchased but inherited properties are now going to be paying more than double their yearly expenses for taxes. It’s a big hit. You can’t just sit on it like you normally would. It’s a full-on liability for people,” Huskilson says.

Aside from out-of-province buyers, there’s a lot of interest from young Nova Scotian families, Huskilson says. This segment could continue to grow as remote work becomes more established and out-of-province buyers are dissuaded by the new taxes.

What’s selling and what isn’t?

Waterfront properties are a key commodity right now, both oceanfront and lakefront. Oceanfront properties are more popular as four-season homes or cottages, while lakefront properties are in demand among those looking to take advantage of recreational boating.

“They’re all moving,” Huskilson says. “Everything from three-season, non-insulated, small little camps to high-end cottages.”

Future predictions for Nova Scotia real estate

Even with the new taxes and the reopening of international borders, Huskilson expects 2022 to be a strong year for cottages.

“I think it will hit pretty similar till at least the fall,” he says. “I don’t see a whole lot of change. I see a lot more [cottages] coming on the market, but more buyers are coming out of the woodwork. So, I don’t think it’s going to switch to a buyers’ market by any means.”

Year-over-year increase of recreational property price in Newfoundland in 2021

According to the Royal LePage report, most of Newfoundland’s cottage market is around the island in the province’s Central Region. Between 2020 and 2021, the area’s waterfront cottages saw a 22.1 per cent price increase, raising the average cost from $131,000 to $160,000.

Who are the buyers?

Unlike Nova Scotia, Newfoundland hasn’t had the same attention from out-of-province buyers. Instead, cottages are being snapped up by locals in their 30s or older with secure incomes, says Glenn Larkin, a realtor in Newfoundland’s Avalon Peninsula. Since some sections of the island lack cell service, remote work hasn’t factored into driving sales, but the inability to travel has played a major role.

“People who have a good bit of equity in their house, now they’re saying, ‘Listen, we can’t travel to Florida, let’s let’s buy a summer cottage,’” Larkin says. During the pandemic, he even encountered some buyers who’d sold their Florida properties in favour of a local cottage.

Larkin isn’t convinced that the reopening of international borders in recent months has swayed too many Newfoundland buyers back to sunnier waters as the cottage market remains strong.

What’s selling and what isn’t

It’s not oceanfront that’s attracting cottagers in Newfoundland, it’s pond frontage. Rather than the large chains of lakes found in central Canada, the province features small ponds. Anything within a two-hour drive from St. John’s on a pond is popular, Larkin says.

“Those have sold very well, and have multiple offers, and are not on the market very long.”

Future predictions for Newfoundland real estate

Same as the rest of Canada, Newfoundland is experiencing a lack of inventory, especially in cottages, Larkin says. Compared to 2021, he feels there’s even less inventory on the market, but sales volume remains just as high.

Despite these trends, Larkin says he believes 2022 is going to be a changing of the seasons in terms of Newfoundland’s cottage real estate.

“Interest rates are getting hit. Gas is high. So, the problem you’re gonna run into is: I’m not going to buy a summer cottage that’s two hours away because the gas is too expensive to go to it,” he says. “It will have an effect. The farther [the cottage is] from St. John’s, the harder it’ll be to sell.”

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‘You’re not buying a $4 million property unless you have a lot of dough.’ B.C. recreational property prices skyrocket

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It’s no secret—similar to the rest of the country, Western Canada’s cottage prices are on the rise. According to Royal LePage’s Recreational Property report.  B.C. is expected to see the average price of a cottage jump in 2022—a 12 per cent increase to a $1,029,280 average. This trend has continued from 2020, as the average price of a recreational property in B.C. increased by 22.4 per cent to $919,000 in 2021.

The closure of international borders during the pandemic drove cottage prices up as many Canadians sought domestic retreats. But even with international borders reopening, the prices continue to rise.

Unlike Ontario and Quebec, B.C. and Alberta don’t have well-defined “cottage countries.” Any waterfront properties that the provinces have are on the ocean or on a few specific lakes.

Since the areas where you can buy a recreational property in B.C. and Alberta are limited compared to central Canada, the surge in demand during the pandemic has kept inventory low and prices high.

Year-over-year increase of recreational property price in B.C. in 2021

All of British Columbia’s landlocked recreational properties saw an average price increase in 2021. Invermere, near the Alberta border, saw the largest change with an 88.1 per cent increase from $354,000 to $666,000. This was followed by the Comox Valley area, which saw a 28.7 per cent increase from $610,000 to $785,000. And then Pemberton, 25 minutes north of Whistler, increased 24.7 per cent from $1,000,000 to $1,247,000.

In terms of waterfront properties, Central Okanagan saw the biggest jump, with a 20.2 per cent increase from $1,955,000 to $2,350,000.

Who are the buyers?

The people buying waterfront recreational properties in B.C. right now are wealthy families, says Francis Braam, a Royal LePage broker in Kelowna. “Nobody else can afford it. You’re not buying a $4 million property to use on the weekend unless you have a lot of dough.” The same holds true for ski chalets, Braam says.

Interestingly, what Braam isn’t seeing lately is foreign buyers. He points to Big White Ski Resort in Kelowna as an example. “At Big White, we used to have a lot of foreigners who bought property—Europeans, Australians, Americans, they’re gone. It’s 100 per cent a Canadian market now,” he says. “They couldn’t get in for the last two years. Will they ever return? I don’t know. It’ll take time.”

What’s selling and what isn’t?

The average price of a recreational property in B.C. tends to balloon thanks to a couple exclusive areas, namely Whistler and Okanagan Lake. In 2021, the average price of a recreational property in Whistler increased by 14 per cent to $2,738,000. Whistler’s considered one of the best ski resorts in Canada, making chalets close to the hill extremely desirable.

The same applies to Okanagan Lake, which stretches 135 kilometres in length and is home to around 400,000 people. Although, many of the properties on Okanagan Lake are permanent homes, not just cottages, Braam notes. Since Royal Lepage isn’t able to discern what the property’s being used for, these waterfront homes are included in the company’s report, driving up the aggregate price of recreational properties in the area.

Another peculiarity with the report is that it recorded a drop in price for North Okanagan waterfront properties. Out of every cottage market in Canada, this is the only one to see a decrease in price, dropping 3.8 per cent from $1,403,000 in 2020 to $1,350,000 in 2021.

“That would be an anomaly,” Braam says. “If you took a house that sold 18 months ago on the water and then put it on the market today, it’d be worth more money.” What likely happened is that the more affordable properties on the lake sold in the last 18 months or in the last quarter, skewing the aggregate price, he says. “There’s no way the price of that product has gone down.”

Future predictions for B.C. real estate

In the real estate market around Kelowna, Braam says he’s already seeing prices settle. “I don’t think prices are going to drop, but we’re not going to maintain the same pace of two to three per cent per month the way it’s been going up for the last 18 months.”

Thanks to the province’s limited supply of available cottages, Braam doesn’t expect the market to crash. Even now, he only has a month’s worth of available listings. Supply in B.C. is likely to stay low. When you look at the province’s geography, Braam says development is restricted by lakes and mountains. Plus, B.C. has an agricultural land reserve, where large swaths of land are devoted to agriculture.

This means that the province is often restricted to tearing down old homes and building new ones, which is more expensive than developing on available land, Braam says.

“Thirty years ago, we could build a house in 90 days. That same house takes nine months to build now or a year,” he says. “It’s more complicated to build, the consumer has demanded more, they’re not as simple houses to build, and the building code has also made it much more difficult.”

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Cottage Life

Ontario cottage regions with the biggest and lowest price jumps in 2021

Illustrations by Taylor Kristan

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.”

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Cottage Life

How to avoid falling victim to a bad cottage real estate deal in a hot market

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Low inventory of recreational property is forcing buyers to compete against multiple-interested parties, often driving the cottage’s price well above asking.

With cottages forecasted to remain a hot commodity this year, according to Royal LePage’s 2022 Recreational Property Report, inventory across the country is expected to remain low, driving up the average price of a Canadian cottage by 13 per cent to $640,710.

“What we are seeing in this market is, generally speaking, fewer buyers are competing for the same property, but those buyers are highly qualified, very serious, and highly motivated,” explained Susan Benson, a real estate broker in Muskoka. “In almost all cases, they have lost out in a previous competing situation. So, by the time they get to one that they really want, they’re invested.”

To make themselves more appealing to sellers, many buyers are presenting firm offers, forgoing property research to close the deal fast and eschewing conditions, such as a home inspection. The issue with skipping these steps is that you could end up paying over asking price only to discover major problems with the property that will cost you extra.

No matter how badly you want a cottage, there are certain steps you shouldn’t compromise on. Here’s everything you need to do, to avoid falling victim to a bad real estate deal in a hot market.

Work with a local realtor

It may seem wise to save some cash by handling real estate negotiations yourself, but without a realtor there is a lot you can miss. “They will surround you with a team of experts and resources that can help guide you through what is a really challenging time [in the cottage market],” Benson says.

In particular, you want to partner with a local realtor, someone who knows what’s available in the area and can help you find the type of cottage you want. Knowledge of the area’s geography and nearby services makes a local realtor better equipped to brief you on any foreseeable issues with the property, whether the property’s overpriced, and whether it’s worth engaging in a bidding war.

Use a home inspector

The last thing you want is to purchase a cottage only to find out it has a cracked foundation, a rotting boathouse, or a long list of other problems that could require further investment. The best way to avoid any surprise renovations, Benson says, is to hire a home inspector.

“We’ll have a home inspector look online at the listing pictures just to see if there are any obvious red flags,” Benson says. “If our buyers really like the place, and we’ve gone to see it, we will try to arrange a second showing for the home inspector.”

The issue with this is that COVID has affected showing times. Previously, potential buyers routinely had an hour to look over the property, but in many cases, this viewing window has been shortened to 30 minutes.

“That’s a real challenge,” Benson says. “But [a home inspector] has a critical eye that can pick up on unanticipated maintenance costs, such as a boathouse and docks, to get a sense of the condition they’re in, and the condition of the crib or structural supports. If something’s wrong, that can be a really expensive unanticipated cost.”

Speak to neighbours

As a realtor, Benson says she often speaks with cottage neighbours on behalf of the buyer. “Now that we’re two years into COVID, there are many, many more people actually living full time in cottage country. So, it’s usually very easy to find a neighbour, and they’ll give you all kinds of insights.”

By speaking with neighbours, not only will you get a sense of what the area has to offer, but you’ll also get a better idea of who you’ll be residing next to. There’s always a chance that the neighbouring property could be a cottage rental known for hosting large, rowdy groups.

Research the property

Your prospective cottage may look great during the summer, but without proper research you could have no idea that it sits in a floodplain. Or, if buying during the winter, you may be won over by the four-season access, but what happens when the ice melts and you’re left with a weedy shoreline.

Neighbours can help provide this information, but Benson also suggests looking at a topographical map of the area to see if flooding could be an issue. While you’re at it, you should also research the property’s zoning information.

“You might think your cottage is in the middle of nowhere, but in fact, you’re near a proposed or approved development, particularly in proximity to places that are zoned under a resort zoning, or in proximity to a marina,” Benson says. “You want to make sure it’s the right location.”

Having a solid grasp of the property’s zoning will let you know whether you’re allowed to rebuild, renovate, or add any new structures. It’ll also avoid any nasty surprises, such as having to purchase the cottage’s shoreline or road access from the municipality.

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Choose a reliable mortgage broker

Similar to your realtor, a good mortgage broker should know the cottage market. That way, they can help you pick a financing plan that fits both you and your property’s needs.

“What you don’t want is to pay a premium price for a property and then have after-the-fact money problems that turn what was supposed to be a dream into an absolute nightmare,” Benson says.

This is particularly true for foreign buyers or anyone looking to use the cottage as a rental, she adds. “You really have to understand the tax implications of that.”

When choosing a mortgage broker, Benson says you need to make sure their focus is on you as a client. “What I would say about a really good broker is that they’re very responsive to questions and are willing to take the time to educate a buyer about the implications of what they may be borrowing…and are willing to look at options beyond a very specific portfolio of lending options. The broader the better.”