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Cottage prices in Ontario expected to dip 5% this year, report says

CLARRIE FEINSTEIN

Ontario’s cottage prices are expected to soften after two years of unprecedented growth in recreational property, according to a new Royal LePage report.

The province is forecast to see a five per cent price decrease in 2023 compared to 2022, amid waning activity. It is the second highest decline after Quebec’s expected eight per cent drop this year. Both provinces come out ahead of the national 4.5 per cent price drop.

The price decline follows two years of exceptional growth as interest rates remained at record lows and urban dwellers wanted greater access to the outdoors, as well as local travel options, which was dampened by the pandemic, the report said.

“After two years of relentless yearround competition, Canada’s recreational property markets have slowed and returned to traditional seasonal sales patterns,” said Phil Soper, president and CEO of Royal LePage.

“While interest rate hikes have less of an impact on the recreational market than homes in urban settings, because families typically put more money down and borrow less, general consumer inflation combined with a severe lack of inventory has dampened sales activity.”

More than half of recreational property experts across the country reported lower inventory than last year in their respective regions, and 65 per cent reported reduced inventory compared to typical prepandemic levels, the report added.

Building came to a grinding halt when the Bank of Canada began to hike rates and builders were

concerned about a full-blown recession, Soper said.

“People expected high unemployment and discretionary expenditures to be put aside,” he said. Combined with the slowdown of building in the pandemic due to labour shortages and supply chain issues, the inventory in cottage country hasn’t been able to meet the demand in years, he added.

Demand has also lessened in a high interest rate environment.

Shirley Rule, a broker based in Haliburton, said in the first three months of 2022, there were 34 sales in recreational property compared to 24 sales in the first three months of 2023.

“Sellers are expecting the same 2022 prices and buyers are cognizant of what’s going on (in the market) and are waiting for prices to come down,” she said. “That causes a problem, because some cottages are priced too high.”

She said there aren’t bidding wars like there were a year ago, which saw properties sell for 120 per cent above asking in the region. Now she said it’s around 95 per cent above asking.

In 2022, the aggregate price of a single-family home in Ontario’s recreational property market increased 7.3 per cent year over year to $634,800.

As prices are expected to drop five per cent in 2023, is the cottage market bubble bursting?

“It’s more of a correction,” Soper said.

“It’s not like in urban centres such as Toronto which have more than a 40 per cent drop in sales or an almost 20 per cent drop in prices year over year. The prices we’re seeing in the spring market are a delayed reaction of the overshooting we saw in the pandemic.”

Rick Laferriere, a broker based in Simcoe said drastic price drops have occurred in cottage country, it just depends on the location.

“The value of your property hasn’t dropped if you’re in a great area,” he said.

“But if you’re in an area where prices shouldn’t have been so elevated then you’ll be hit.”

For example, in the south end of Lake Simcoe, a property that sold for $1.7 million in the pandemic recently sold for $1.3 million, which is a $400,000 decrease or more than a 20 per cent drop. But, Laferriere is putting a property on the market for $3.6 million which will sell for that amount because it’s in a prime location, he said.

It’s more accurate to view some pockets of the recreational market bursting, instead of the entire industry.

“We’re in a market now that’s closer to what we were seeing pre-pandemic,” Rule said.

“People have more time to sit back and wait for the right property. If they’re putting in an offer they can generally ask for a home inspection whereas in the pandemic they couldn’t. Prices are still a bit elevated but they’re not climbing anywhere close to what they were last year.”

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2023-03-31T07:00:00.0000000Z

2023-03-31T07:00:00.0000000Z

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