With early 2023 reports suggesting a year-over-year decline in cottage property prices, there seemed to be few exceptions. In Haliburton, prices fell by 26 per cent, whereas places like Kenora reported a decline of nearly 60 per cent. Even popular locations like Muskoka saw a double-digit slide. But what may have prompted this once red-hot market to cool?
John Fincham of Re/Max Parry Sound Muskoka Realty believes several reasons prompted the cooldown, including COVID-era purchasers re-thinking their buy.
“Between 30-40 per cent of the waterfront listed was purchased during COVID,” says Fincham. “Now, with interest rates rising, you’ve got a huge pool of people that have bought in the last three years, and if a third of them decide to sell, that puts a lot of downward pressure on the numbers.”
There’s no doubt recent rate hikes are contributing to the situation, but Christopher Alexander, President of Re/Max Canada, is optimistic.
“Any time there are interest rate increases, buyers tend to shift to a ‘wait and see’ mentality,” says Alexander. “However, once stability returns to inflation, I expect buyers will return in a big way.”
Aside from increasing rates and concerns over recent buyers getting cold feet, he says long-term owners have little intention of selling anytime soon.
“We have seen a trend where boomers are passing their cottages on to their children, and Gen Xers are buying property with the intent of passing it down to future generations. This will likely put further strain on inventory levels,” says Alexander.
Fincham says the cottage price drops may be even larger than reported.
“The mid and lower-priced cottages continue to be an issue because interest rates affect the average person a lot more,” says Fincham.
“As sales drop, the percentage of those selling that are the super high-end stuff exaggerates the difference,” Fincham says. “Because the pool is so much smaller, it doesn’t take many 10 million dollar cottages to pull that price up, and so I think in real terms the prices of cottages have dropped more than the published numbers.”
But Ian Filips of Century 21 Northern Choice Realty says that properties on the luxury market in his region are currently selling strong.
“I don’t feel that values in Kenora have dropped to some of the levels that have been indicated through the first half of the 2023 year,” Filips says.
The Re/Max study reported a 59.9 per cent price drop year-over-year for houses in the Kenora and Lake-of-the-Woods region.
“We have seen many higher-priced luxury cottages sell within a reasonable list-to-sale date and do not see a drop in that area, but rather a stronger increase in those sales with qualified purchasers looking for those unique properties,” says Filips. “Even with the interest rates increases, I believe the Kenora cottage market and values to be stable.”
Between the smooth-selling luxury properties and slow down of moderately priced traditional cottages seen this spring, what does the market have in store for Ontario next?
According to Alexander, a balanced fall market is looking promising.
“The market has improved tremendously since the original report was released in April. Haliburton, in particular, gained a lot of momentum in April, May and June, with more listings coming to market, as well as renewed buyer activity,” he says.
For those looking to get into the cottage market right now, with theses prices, Fincham suggests taking your time and doing it right.
“I think [buyers] need to be fussy. Before, when inventory was tight, anything was selling. But now, get on a good lake with good quality water in a good area. Play it smart — because you can now.”
As for selling — pricing accurately based on the current market is best.
“It’s important for sellers to listen to their realtor with regards to asking price and the strategies in marketing their properties,” says Filips. “If they want the sale within a reasonable market time frame, it’s important to price it correctly the first time.”