Real Estate

Will new housing legislation actually make cottages more affordable?

Real estate market, graph, up arrow. House model and a stack of coins. The concept of inflation, economic growth, the price of insurance services Photo by SERSOLL/Shutterstock

With major change brought on by the pandemic, mortgage rate hikes, and increased urban-rural migration, experts say that the cottage market is slowly returning to its usual high demand, low supply format—even with recent housing legislation meant to ease those factors.

A new StatsCan report on residential real estate investors—using data from pre-pandemic 2020—shows the percentage of investor-owners across five provinces: Ontario, Nova Scotia, British Columbia, Manitoba, and New Brunswick, with the number hovering between 20-31 per cent across the board. 

While the data doesn’t reflect what’s transpired over the past two years, reporting on investors—the first time the Canadian Housing Statistics Program has done so—signifies their increasing role in the market, which could be a bellwether for what’s to come.

Frank Clayton, a professor at Toronto Metropolitan University and a housing market expert, says the report captures a pre-pandemic trend: more investors getting into the market and driving up prices, including cottages. The pandemic only accelerated this, along with another trend—millennials moving to rural areas for space and affordability. Now, “People who bought properties out there might say, ‘This lifestyle isn’t for me’, and they’ll sell,” Clayton says. “But as the population ages and more millennials age, they’ll still be looking for more space and more recreational pursuits.”

Given recent rate hikes and a drop in housing prices and sales, Clayton says it’s a wake-up call both for prospective buyers and those who overspent. There’s also new legislation, such as the federal Underused Housing Tax, Ontario’s updated Non-Resident Speculation Tax, and Bill 23, all of which aim to broaden housing availability and cool the investor trend.

With all this in mind, it may seem that the market is giving way to hopeful cottage buyers, but Clayton says it’s unlikely the floodgates will suddenly open, given that limited supply continues to be a factor. The legislation primarily impacts urban centres, and most new developments are condos, which tend to be more difficult to pass in cottage country. Further, he says, taxes for foreign buyers likely won’t deter those in the cottage market, since many of those buyers tend to have significant wealth, or are in partnership with a Canadian and can share costs. 

Still, Clayton says increased urban-rural migration, coupled with the preference for condos could lead to a push for more of those developments in cottage regions. He points to Friday Harbour resort in Innisfil, Ont., and the recent purchase and redevelopment plans for Deerhurst Resort as examples of “millennials moving into the markets in a big way.”

So, what can this report ultimately tell us about the future of the cottage market? If anything, it illuminated the need for clearer data. For example, cottage owners were put under the umbrella of ‘investors’ even though many don’t use their property strictly for investment. “There are as many definitions of investors as there are people,” says Joanie Fontaine, one of the authors of the report. 

She says cottages are tricky for a few reasons, namely, many owners may rent their cottage for just a few days a year (not enough to qualify as an investment), and some may list their main residence in a city, but spend far more time at their cottage, making it hard to clarify primary vs. secondary residence data. She also points out that despite condos being the preferred investment property, when investors did own in a rural area, 99 per cent of the time it was a freestanding home. 

Though prices may be creeping down, for the time being, demand in the cottage market remains high. “Demand is going to be very strong, just because of basic demographic and economic forces,” says Clayton. “You can’t create more lakes and mountains.”

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