There’s been a lot of talk about recessions lately. With Canada’s inflation rate hitting 8.1 per cent in June, the largest yearly increase since January 1983, the Bank of Canada is driving up interest rates in an attempt to curb consumer spending and get supply and demand back into the same ballpark.
Real estate—cottages in particular—was expected to be one of the first industries hit by the bank’s tightened purse strings. Yet, a report from real estate company RE/MAX shows that cottage prices are remaining strong throughout Canada, with many regions still seeing price increases.
In 2021, the aggregate price of a cottage in Canada jumped 21.5 per cent to $567,000, according to Royal LePage. This was mostly due to the pandemic. Domestic, rural properties skyrocketed in popularity as people looked to escape urban centres and businesses transitioned to remote work. But even in 2022, when COVID-19 has become a part of our everyday lives, and many businesses are reintroducing in-office work, cottage prices remain high.
Here are the year-over-year recreational prices as of May 2022:
- Kawartha Lakes, Ont.’s median residential property price rose by 30.4 per cent to $806,000.
- Georgian Bay, Ont.’s benchmark single-family home price rose by 17 per cent to $804,800.
- Powell River Sunshine Coast, B.C.’s average price of homes sold rose by 43.3 per cent to $677,950.
- Prince Edward Island’s average price of homes sold rose by 20.9 per cent to $405,686.
Despite these increases, cottage prices aren’t skyrocketing the way they were during the pandemic. This is largely due to a decrease in overall sales volume. “You can really see the cut-off at about the end of May in my market,” says Bryan Coxworth, a real estate broker with Sotheby’s International Realty who operates out of Muskoka and Georgian Bay. “April and May I was still getting competing offers on pretty much everything I was selling. And then it kind of abruptly ended right at the end of May, and the market really slowed down through June and much of July.”
As of August, Coxworth has noticed people start to re-enter the cottage real estate market. This week, he sold a waterfront property within 95 per cent of its listed price. “That’s average. That’s where things typically sell if you look at 20 years of history,” he says. “COVID skewed those numbers. But I think where we are now is we’re back to a more normal market.”
A decrease in sales volume means that offers are no longer being driven above the asking price by bidding wars—an occurrence unique to COVID in cottage country, Coxworth says. But prices aren’t going down either. Stable internet and the ability to work from cottage country have ensured that there is still a demand for cottages according to RE/MAX.
But demand has waned compared to 2020 and 2021, especially when you look at the number of available cottages on the market. “During COVID, I was running two to three listings and they’d all sell within two weeks, so you never built up any inventory,” Coxworth says. Pre-pandemic, Coxworth managed 20 to 30 listings at one time. Now, he’s juggling around 14.
“In my mind, we’re not back to the number of listings that we’d seen through 2017, 2018, and 2019. We’re not up to that level of listings. Although, I can see it increasing, and I think it will continue to increase.”
With fewer competing offers and more supply, transactional power has started to shift back to the buyer. Previously, with bidding wars, buyers were often forced to pay over the asking price and didn’t have the luxury of including conditions with the sale. But that’s changing.
“Now, a buyer has an opportunity to come out, negotiate a little bit on the price, and protect themselves with the appropriate conditions on financing and a home inspection,” Coxworth says.
Without as many competing offers, buyers also have time to step away and think about the purchase. Whereas during COVID, if you didn’t act immediately, the cottage was gone, Coxworth says.
“If I were a buyer, this would be the time I’d be wanting to buy because I have more control over the situation now than I did a year ago. Far more control.”
Experts at RE/MAX say it’s unlikely cottage prices will ever return to pre-pandemic levels, but they may start to stabilize.