Newfoundland cottages

By the time Hurricane Fiona struck the coast of Atlantic Canada, wind speeds were well above 100 km/h and the rain was pouring so hard you couldn’t see through it. As the storm moved north along the coast, touching down in PEI, Nova Scotia, Newfoundland, and sections of Eastern Quebec and New Brunswick, houses were flattened, trees were uprooted and toppled across roadways, ocean waves devoured the coastline, and lives were lost.

At an estimated $660 million in insured damage, Hurricane Fiona is the most expensive weather event to ever hit the east coast, and the tenth most expensive in Canadian history, according to the Insurance Bureau of Canada.

But a handful of cottagers in PEI and Nova Scotia aren’t included in this insured damage data. That’s because most Canadian insurance companies don’t cover damages caused by storm surge—when the ocean rises above its predicted level.

With the climate changing so quickly, the risk modeling needed to develop prices for coastal flood coverage is highly complex. Without accurate risk modeling, the risk is deemed too high to make the coverage affordable and available, the Insurance Bureau of Canada says.

This means that many of the Atlantic Canada cottagers whose properties were swept away by ocean waves will have to pay out of pocket to rebuild.

A Guelph-based insurance company is trying to change this. In 2015, after watching floods ravage properties in both Calgary and Toronto, Co-operators Insurance introduced its Comprehensive Water coverage.

“We saw that there was an unmet need, and we felt compelled to offer a flood coverage that was more comprehensive and available to all Canadians, regardless of their risk,” says Michelle Laidlaw, Co-operator’s assistant vice president of national product portfolio. “What we’ve seen is that incidents of extreme weather, like flooding, in our country have become more sudden, more frequent, and more severe. This is a cost to Canadians, and we expect this trend to continue as we face a climate crisis.”

Co-operators launched its Comprehensive Water coverage in Alberta in May 2015. It’s since introduced the coverage across the country, making it available to Atlantic Canada in 2018.

The company’s Comprehensive Water coverage protects against storm surge, waves and spray caused by a hurricane or storm, flooding from a natural or man-made body of water, such as a pond or river, flooding from heavy rainfall or snowmelt, sewage, and septic backups, and a rising water table.

It’s not an easy insurance product to provide, Laidlaw admits. With the climate crisis accelerating, the way the company calculates risk and premiums is always changing. “It’s a risk-based pricing model,” she says. “What that means is that some clients who are in higher-risk areas will have a higher cost. So, premiums are based on the client’s specific needs and the risks associated with their property.”

When calculating premiums, the company looks at a complex list of factors, including a property’s proximity to water, its flooding history, its elevation, soil type, and whether it has a loss prevention device, such as a sump pump. Premiums are specific to a customer, meaning someone in a high-risk zone could pay thousands of dollars a year, while someone in a low-risk zone could pay hundreds.

The insurance covers all types of properties, including cottages, regardless of whether the inhabitant owns or rents. According to Laidlaw, 60 per cent of Co-operators’ Atlantic Canada clients have purchased Comprehensive Water insurance. The company is the third largest insurer in Atlantic Canada, accounting for 11 per cent of the market share.

Co-operators’ claims team is on the ground in Atlantic Canada, working to provide support to its clients by processing claims as quickly as possible, including damage caused by storm surge.

“We continue to educate and promote this product in Atlantic Canada and across the nation. We are encouraging our clients to take this product and to be aware of their flood risks,” Laidlaw says. “We know it’s significantly changing the landscape of where Canadians choose to live.”

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.”