Do blue-green algae blooms impact waterfront property prices?

With warmer temperatures increasing the rate of blue-green algae blooms across Canada, some waterfront property owners may be wondering how algae could impact the sale of their cottages. Some studies suggest algae blooms can decrease prices by up to 40 per cent, while local realtors say the impacts are far less noticeable.

Andrew Bechard is a PhD economist from the University of Rhode Island who published a 2022 study analyzing the impact of algae blooms on Florida’s property prices. Based on data collected between 2007 and 2020, Bechard’s study shows that blooms can reduce the number of waterfront properties sold by up to 80 per cent, but only if they last several months.

“There’s definitely a temporary decline in the market. They’re either taking longer to sell, or property owners are taking lower offers,” Bechard says.

People who sold or rented their properties amid long-lasting blooms did so at a decreased price. Long-term housing prices dropped anywhere from 10 to 20 per cent, where short-term rentals suffered up to 40 per cent decreases. Hotels fared much better, with only a five per cent decline in prices.

But if property owners detect blue-green algae on their lakes, it’s worthwhile for them to wait before lowering prices—blooms that dissipate after one or two weeks show a negligible impact on buyers’ interest in long- and short-term rentals. This was consistently the case in Bechard’s study, though hotels saw a significant decline in rental frequency with shorter blooms. He says this is because it’s much easier to adjust or delay hotel bookings.

“Rental properties are booked out longer in advance, so there’s less flexibility in terms of going or not going. There’s already a sunk cost,” he says. “But we don’t see the one to two week blooms affecting rent that much.”

Sathya Gopalakrishnan, an associate professor at Ohio State University with expertise in environmental economics, conducted a 2022 study of Lake Erie’s algal blooms. She found that properties within 1.2 kilometres of a lakeshore were most impacted by blooms over a six-month period. The study also concluded that property prices on Lake Erie decreased incrementally by around 1.7 per cent for every additional microgram of algae toxin per litre of water.

The maximum concentration a waterway in Canada can have before it becomes unsafe for recreational activities is 10 micrograms per litre, according to the government of Canada. Gopalakrishnan says the average algae concentration for Lake Erie is more than half that amount, at 6.4 micrograms of toxin per litre.

“If we were to reduce the phosphorus content of Lake Erie by 40 per cent, we would get an annual benefit of up to $43 million in housing values,” she says, referring to the conservation goal outlined by the Great Lakes water quality agreement.

Recreational water activities are one of the main appeals of waterfront properties according to Jessica Hill, the president of Peterborough and the Kawarthas Association of Realtors. She says old blue-green algae blooms have a rancid smell that buyers will be able to pick up on while touring a property, not to mention while they would be swimming or boating.

“If there was a bloom that was creating a rancid smell, that could definitely deter buyers, which could result in a decreased price,” she says.

Hill hasn’t noticed any major bloom-related decreases in sales or sale values in the Peterborough and Kawartha areas, despite the presence of blue-green algae in Peterborough County earlier this summer. Neither has Susan Benson, a Royal LePage real estate broker for the Muskoka area, but she says blooms are still something to take seriously.

“Buyers are still considering algae blooms and water quality as one of many factors influencing the price of a cottage,” Benson says.

Hill recommends working with a local agent who knows about the lake’s bloom habits, as they will be better equipped to answer questions about water quality.