Ontario cottages are hot commodities right now. The COVID-19 pandemic has caused a frenzy of demand as people look to escape the city. But along with increased demand has also come increased prices. Muskoka, Ont. is a prime example of this price appreciation.
Over the last five years, the median price of a waterfront cottage in Muskoka has increased by 77 per cent. In the last year alone, the median price has jumped by 33 per cent. On three of Muskoka’s biggest lakes—Lake Rosseau, Lake Joseph, and Lake Muskoka—the median sales price over the last year has increased by 40 per cent from $1,450,000 to $2,040,000.
But there are signs that the appreciation in Muskoka’s cottage prices is starting to slow. “The market is definitely changing,” says real estate broker Susan Benson. “We believe it’s due to buyer’s fatigue.”
Buyer’s fatigue refers to people who are becoming disheartened with the real estate process after losing multiple offers on properties. In Muskoka, Benson says this is happening because people are being priced out of the market, and because they’re tired of dealing with the added requirements of submitting an offer.
The increase in demand caused by the pandemic has made the bidding process much more competitive. As a result, buyers and their realtors have gotten creative, using different tactics to secure their desired Muskoka cottage property. “We’ve gone from a consistent strategy of having an offer date, reviewing multiple offers, selecting one, and selling the property, to a whole variety of marketing approaches and tactics,” Benson says.
Two of the more common tactics being used are bully offers and escalation clauses. Bully offers—or pre-emptive offers—are when a buyer submits an offer before the seller’s offer date. Many of these offers are made in cash, they’re above listing price, and they come without conditions.
An escalation clause is when a buyer attaches a note to their offer, claiming they’ll pay a specified amount above the highest bid.
Benson says she’s also seen sellers who are unhappy with their offers reject all of them and then relist the property at a higher price.
“When you’re looking at all of this, it’s like a shifty storm before things sort of settle out,” she says.
Due to the high prices and shifting tactics, buyers are moving to the sidelines as they wait for the market to settle. “Late July through February, depending on the property and location, we might have seen anything from 12 to almost 30 offers,” Benson says. “Now, we’re seeing somewhere between two and five. But the buyers that are still participating in multiple offers are very motivated.”
Based on what she’s heard from her colleagues, Benson says it sounds like similar trends are happening in other parts of Ontario’s cottage country. “On the buying side, it’s actually making things a little bit more hopeful,” she says.
But this doesn’t mean that Muskoka cottage prices will start dropping. Benson stresses that the signs she’s seen only indicate that the rate at which cottage prices have been increasing will start to slow. It remains a seller’s market.
If you are still planning on buying a cottage, Benson advises sitting down with your lender first. “Have a really good discussion about how much you’re prepared to invest in a recreational property,” she says, “because that’s still what it comes down to.”