Relaxing on a dock is an even more laid-back activity than usual in many idyllic locations across the country this summer.
While many Canadians still aspire to own a lakeside haven or oceanfront retreat, the frenzy to buy has subsided to a languid search.
Sales have perked up with the warmer weather, but higher interest rates, economic uncertainty and government tinkering with rules and taxes have instilled some caution in potential buyers, industry players say.
Many of those who already own a cottage, cabin or waterfront home are not rushing to part with them, so supply remains tight.
Paul Crammond, broker with Chestnut Park Real Estate Ltd., says the shortage of inventory that has weighed on sales in many cities is vexing for cottage buyers as well.
“It’s a challenge to get clients to come up and look at one property,” he says. “If they are going to come up, you would like to show them a selection.”
He recalls the market in years past when he could show a potential buyer eight or 10 places in one day. He says most owners who are planning to list will have done so by now. If they want one last summer at the cottage they will wait until September.
Demand, he says, has calmed from the pandemic peak and seems to be on par with the level in 2018 or 2019.
“There are still enough buyers left to outpace the inventory.”
Mr. Crammond estimates that prices in the luxury segment in Muskoka and Lake of Bays, where he does much of his business, are about flat compared with last year.
He senses that some buyers are waiting on the sidelines to see if prices drop but the lack of supply is keeping the market steady. Still, seeing financial assets rise or fall in price often contributes to a willingness to spend.
“Psychologically, if some people are feeling less wealthy on paper, some will choose to sit on the sidelines.”
Last year, for example, there were 14 sales on sought-after Lake Rosseau. In a normal year there are 30 to 45 sales, he says.
“The demand was there, but there was no supply.”
Still, buyers are cautious about looking at a property if they view the asking price as too high, he says.
Mr. Crammond and Ragan Zilic Lovegrove of Chestnut Park have listed a landmark property on Lake of Bays for $5.99-million.
The cottage at 1023 Scotts Boathouse Rd. has 600 feet of shoreline and a vintage two-storey boathouse with four bedrooms and living quarters above the boat slips.
In August of last year, the asking price was $9.359-million. Mr. Crammond says the owners have become more serious about selling this year and lowered the price.
The cottage market is not immune to corrections, he adds, noting they have happened in the past – particularly during tumultuous periods such as the global financial crisis.
“In 2008 and 2009, we had a few people that absolutely had to sell. So they reduced their price. Others said, ‘I don’t need to sell so I will hold on.’”
Anita Latner, broker with Anita Latner Realty Inc., says the sprint to find a safe haven that spurred on competition in 2021 has slowed to a calmer pace in many parts of Ontario cottage country.
“It was really panic buying during the pandemic,” she says of the frenzy that saw 10 or 15 bidders vying for one property in some cases.
During the winter months of 2021, buyers were trudging through knee-deep snow to view properties and submitting unconditional offers without the benefit of a home inspection.
In some areas, prices skyrocketed by more than 100 per cent in one year.
Ms. Latner says some of the more impulsive buyers during that time may have discovered they’re not really cottagers, while others may have discovered flaws such as a weedy shoreline or water too shallow for swimming when the snow melted.
The spring market so far has been a little bit sluggish, in her opinion. Some properties are selling quickly at good prices while others are languishing if they are priced too high.
“A lot of the sellers still have pandemic eyes and the buyers are over it.”
Ms. Latner is glad that some of the steam has come out of the pressure cooker environment of the pandemic. Buyers can take their time to thoroughly inspect a property and conditional offers have returned.
In British Columbia, the Vancouver real estate market has rebounded recently after a slow nine months, says real estate agent Ian Watt of Sutton Group-West Coast Realty.
Sales of waterfront cabins and inland vacation homes lag the city market slightly, he says, but buyers are returning.
“My clients have come out of their ‘the sky is falling’ mentality.”
Mr. Watt spends part of his time living on Mayne Island, which is part of the Gulf Islands chain.
He sometimes travels between his island home and Vancouver by sea plane, which takes about 15 minutes, he says. Many people who work in Vancouver are doing the same now that they don’t have to head to the office every day.
During the real estate downturn that began when the Bank of Canada moved to hike its benchmark interest rate in early 2022, homeowners on the Gulf Islands were willing to sell at a discount, says Mr. Watt.
“You could just write an offer 10-per-cent or 20-per-cent lower and they would take it. If they didn’t take it, the property would sit.”
Now that the market is showing renewed strength, a waterfront property in the $1.3-million range will sell within a week, he says.
“All of a sudden people are jumping back in.”
In downtown Vancouver, a property around the $1.3-million mark may be a 1,000-square-foot condo on the eighth floor looking into another building, he points out.
On the islands, that amount fetches a 2,500-square-foot home with a waterfront and a lifestyle.
He points to the recent sale of a luxurious three-bedroom house on Mayne Island’s waterfront which sold for $1.83-million after being listed with an asking price of $1.899-million. The property at 719 Wilks Rd. sold after 33 days on market.
At 240 Spinnaker Dr., a more modest 25-year-old cabin with an ocean view sold for $700,000 after being listed with an asking price of $719,000. That property was on the market for nearly one year.
As in many real estate markets across the country, sales are hampered by a lack of listings, he says.
“Watch the whales swim as the eagles soar by,” entices the listing for an oceanfront property currently offered for sale in New Brunswick.
The promise of luxury, privacy and nature will likely draw a national or international buyer, in the opinion of real estate agent Jason Stephen of Royal LePage Atlantic in Saint John, who listed the 11.6-acre property with an asking price of $4.75-million.
The fact that 868 Fundy Dr. is located on Campobello Island, 15 minutes from the Maine border, is also likely to appeal to a U.S. buyer, adds the agent.
Mr. Stephen says the appetite of buyers’ appetite for vacation properties in New Brunswick remains healthy, even as the pandemic-era mania for a safe haven wanes.
Mr. Stephen, who helped to resettle hordes of buyers from other provinces to the Saint John area during the pandemic, says the number of people migrating east has dwindled but many people still look to the Maritimes for a vacation home.
“It’s just as hot for waterfront properties as it is for residential,” he says.
Some clients have sold richly priced properties in Ontario’s Muskoka region and purchased a property for on the ocean for less, he says.
“They sold in a high market and bought here,” he says.
The foreign buyers’ ban introduced by the federal government does not encompass some regions of the province, he adds.
Mr. Stephen adds that the foreign buyers’ ban introduced by the federal government does not encompass some regions of the province, including the island property, he adds.
And while the next owner of Fundy Drive will likely come from out-of-province, there are properties available for those with a smaller budget, though the supply shortage is also a factor there.
The benchmark price for a single-family home in the Saint John area was $278,000 in April, according to the Saint John Real Estate Board.
Piers Baker of Duckworth Real Estate in Chester, N.S., remains busy with showings and listings, but buyers are more cautious this year compared with the past few years, he says.
“There are more people on the fence,” he says. “Sometimes that one offer will take a while to come.”
Mr. Baker points to the shock of higher interest rates, increased taxes and misconceptions around the foreign buyers’ ban as three of the factors muting sales – particularly at the high end.
“It is a triple threat,” Mr. Baker says.
Some buyers don’t need a mortgage but they are also astute when it comes to values, he adds.
Nova Scotia is popular with people from out of province, he says, pointing to his most recent four sales, with new owners from Montreal, Toronto, Sanibel Island, Fla., and New Hampshire.
He adds that many people outside of Canada don’t know that the popular South Shore, where he does much of his business, is one of the areas exempt from the foreign buyers ban.
Many come from out of province or overseas for the sailboat races, windsurfing and surfing, he adds.
“The ocean has so much to offer,” he says. “From a competitive sailing standpoint, Chester Yacht Club consistently produces Olympians.”
Properties continue to come on the market says, Mr. Baker, who estimates that listings are at approximately the same level as they were before the pandemic.
He adds that prices are on an even keel at the moment.
“A lot of sellers believe that their properties are still increasing in value when it has actually gone flat,” he says.
Mr. Baker currently has Round Island in Mahone Bay listed with an asking price of $3,999,000. The island, which was a working farm in the 19th century, offers 81 acres with hills, streams, cliffs and a beach stretching for 800 feet.
At 26 Herman’s Point Rd., near the Lunenburg Yacht Club, the three-acre property provides a four-bedroom house and 415 feet of ocean frontage with an asking price of $2,499,000.
Another change giving buyers pause is the provincial non-resident deed transfer tax, which was introduced in 2022 and now stands at 5 per cent.
Buyers who move to the province within six months are exempt from the tax, he says, but those who only visit part-time need to pay the hefty fee.
“It’s a surprise most buyers can’t digest,” he says.
As for sellers, Mr. Baker says homeowners in some areas are listing if they are overstretched on their mortgage payments now that interest rates have moved sharply higher. Others need to move to assisted living or they are selling because they are concerned about the difficulty in receiving emergency medical care in the province.
Based on the year to date, he estimates that his business is running at approximately one-quarter of the tally for 2022 as buyers absorb the changes.
“I think it’s just a pause,” he says of the cooldown. “Last year was just nuts.”
Robert McLister, mortgage strategist and editor of MortgageLogic.news, is bullish on cottage properties over the long-term.
But a cottage or vacation home is a discretionary purchase, he points out, and therefore values have traditionally suffered more than those of a city residence during a downturn.
“Prices plunged last year in many markets,” he says, but the market tends to be cyclical. “If we get a deal on a cottage property, that’s opportunity.”
Anita Latner, broker with Anita Latner Realty in Gravenhurst, Ont., says real estate sales are more temperamental in an economy where so many people are struggling to buy food and pay basic bills.
Many owners of high-end vacation homes are sheltered from the forces of inflation and interest rates, she says, pointing out that many buyers don’t need a mortgage.
But even for those with deep pockets, equity markets are volatile and the bailouts of U.S. and European banks have undermined confidence, she adds.
Ms. Latner says the pandemic trend of empty nesters selling a high-priced principal residence in order to buy a less expensive property in a smaller town or rural area remains strong.
“If people want to retire and tighten their belts, they’ll sell the place in the city.”
Mr. McLister says the Bank of Canada’s efforts to tame inflation with a series of interest rate hikes has made it tougher for borrowers to qualify for a mortgage on a vacation home.
Higher rates also make it harder for borrowers to manage payments.
At the same time, rising rates hurt sentiment, he adds.
In a swathe of Ontario cottage country that includes waterfront property sales tumbled 32.9 per cent in the first four months of the year compared with the same period in 2022, according to the Lakelands Association of Realtors.
Sales in Muskoka, Haliburton and parts of Georgian Bay, are being crimped by a lack of new listings coming onto the market and this has caused inventories to stall and begin to decline again, the association says.
The median price in April was $973,500 for a waterfront property, which marks a decline of 19.2 per cent from the median price of $1.205-million in April of last year. In April of 2020, the median price was $535,000, according to Lakelands.
More recently, tight supply is once again pushing prices higher, the association says.
Mr. McLister says many people who joined the race to buy out-of-town properties during the pandemic used a home equity line of credit tied to a principal residence. A HELOC that carried an interest rate of 2.45 per cent when rates were sitting at emergency lows is likely to have a rate closer to 6.7 per cent today.
Those higher rates are leading to stress for borrowers, and economic uncertainty still poses some risks.
“If you have unemployment go up, you’re going to see more listings.”
If the central bank deems more rate increases necessary, the mood among buyers will undoubtedly turn more gloomy, he adds.
“Everything moves in cycles. If they hike a few more times, you’re going to see some negative sentiment through the end of the year.”
Still, the slide in prices in some areas is offsetting higher rates. Mr. McLister calculates that the buyer of the $1.205-million property in April, 2022 would have a monthly mortgage payment of approximately $4,672.
That assumes the buyer has a $250,000 down payment, a fixed-term mortgage for five years at 4.24 per cent, and a 30-year amortization.
The buyer of the median $973,500 cottage in April of this year would be looking at a five-year fixed at $5.34 per cent. With the same $250,000 down payment and 30-year amortization, that borrower would be paying about $4,009 per month.
In the second scenario, the savings from buying this year would come in at $239,000 over the five years, despite the higher rate.
Mr. McLister cautions that caveats apply: lenders often keep the amortization period for a mortgage on a vacation property to less than 30 years. And a rustic cabin, for example, might require a down payment of 35 per cent or more.
For those who are in the market for a cottage this year, Mr. McLister advises buyers to focus on quality by seeking out a desirable stretch of shoreline with coveted sunrise and sunset views, if possible.
“There are only so many of those properties.”
Ms. Latner recommends that buyers who want to guard against any potential downturn in prices focus on large lakes and prime properties.
“They hold their value and if you overpay, so what?” she says. “When you’re on a smaller lake, that’s when it gets tricky.”
With the nervousness in financial markets and the risk of a recession, Ms. Latner says many people would rather own real estate than stocks and other assets.
“If the price of your property goes down, you still have the property – you can still go swimming.”