Higher gas prices and an uncertain economic outlook means cottage country is becoming further out of reach for some buyers – even as prices soften for some Canadian recreational properties.
After a decade of substantial price increases, a significant jump in listings on the market and fewer buyers have resulted in starting prices that have started to decline in some areas, according to a report by ReMax Ontario Atlantic Canada released today.
Of 45 Canadian markets surveyed, ReMax says 67 per cent reported falling sales.
While most markets saw prices remain flat or increase slightly, some areas are starting to see decreases for the first time. Starting prices in popular Ontario towns such as Haliburton, Bancroft and Parry Sound were down from 10 to 20 per cent, according to ReMax.
In Haliburton, a starter waterfront cottage can be bought for $275,000, down from $350,000 last year. In Parry Sound, a similar cottage can be purchased for $180,000, down from $200,000.
“It’s been a sluggish market. I think given the economic conditions you have to have your head in the sand if you don’t acknowledge that there’s a correction around the corner,” says Muskoka-based realtor Anita Latner.
With the Ontario economy slipping into what may be a technical recession as the manufacturing sector takes a major hit from layoffs and downsizing, discretionary purchases such as vacation homes are typically the first to go.
During the real estate bubble of 1989, prices on cottages fell much more quickly than on primary homes, as buyers unloaded non-core investments.
Parry Sound-based realtor John Sallinen says sales are about 20 per cent down from the same time last year, with properties taking about twice as long to sell.
“Buyer’s aren’t rushing. They’re taking their time and there’s much more to choose from,” says Sallinen.
Meanwhile, higher gas prices have also made some buyers think twice about heading out of town every weekend.
“It’s certainly a consideration,” says Sallinen. “It’s one more thing that people have to think about.”
“There’s no subway to where we’re going, so you have to take the car or the van. And it can take a psychological toll if you feel like you’re getting ripped off paying these prices,” said Latner.
Sallinen says he’s already seeing the effect. Couples who may take two cars to the cottage, with one partner going up early during the week, may now decide to make one trip, for example. Others may not travel to the cottage as frequently.
However, Sallinen he hasn’t lost a sale because of gas prices yet.
“They will find a way to get to the cottage if they have to,” he says.
Latner expects tourism in cottage country to be hit first by gas prices, followed by cottages on smaller lakes.
“The day trippers – people who might have driven up for a picnic – and older folk who may have had a cottage in the family for decades will probably get hurt first,” says Latner.
That scenario would be less likely in Muskoka, where a dozen properties have sold for more than $1 million already in the first four months of the year.
“If you have to worry about gas, then you’re probably not buying a property in Muskoka,” says Latner.
Still ReMax says there is already softening in the upper end of the market, above the $2 million range.
Another reason for softer sales is competition for recreational properties from the United States. Instead of buying a second property in Ontario, buyers are now looking at Florida and Arizona to take advantage of the strong Canadian currency.
With the depressed U.S. market, some American properties are half the price they were only a year earlier. Conversely, American buyers are not as prevalent since the loonie hit par with the greenback.
Another reason for softer sales has been an exceptionally cold winter, say realtors.
“Take what you got in Toronto this winter and double it,” says Latner.
Realtors blamed the exceptionally cold winter for the rocky start to the cottage market. I’ve had clients who haven’t seen their cottage when it wasn’t raining this year.”
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