Now that we’re over a year removed from the pandemic’s real estate boom, some industry experts are seeing Ontario’s cottage country return to a more normal sales cycle. Early in 2023, it was pretty slow, then there was reasonable activity in the spring. As we eventually head into cooler months, the market will likely slow again. But what does this mean for buyers and sellers?
What are fall cottage prices doing?
In 2020, 2021, and even 2022, the cottage country real estate market was in a frenzy. Low interest rates combined with a desire to get out of the city during the pandemic made cottages a hot commodity. With limited inventory, the market was heavily weighted toward sellers, driving up cottage prices to all-time highs.
The remnants of those prices remain, with the average waterfront sales tag in areas such as Muskoka, the Kawarthas, and Georgian Bay still hovering around $1 million. Inventory is starting to increase across the province, but not enough to see a significant decrease in cottage prices which means that cottage prices should pretty much hold throughout the fall.
Who’s buying cottages?
Previously, Baby Boomers dominated the cottage market, but that’s shifted. Fueled by intergenerational wealth, Gen X now leads the cottage market in the number of transactions, buying cottages and wanting to keep them in the family. This isn’t a surprise as over half of cottage owners report that passing down the cottage to family was a key motivator when they first bought it.
Younger generations, such as Millennials and Gen Z, who want to get into the cottage market have to get creative with their buying strategies. In many cases, friends or families are partnering to purchase cottage properties together.
There’s a real long-term orientation going on here! But it’s less than a family of four escaping the Covid nightmare, as those parents are now having to go back into an office or work environment. Instead, it’s slightly older buyers – folks downsizing and/or planning for retirement – pursuing full-time residences in cottage country.
Is fall a good time to buy?
You may want to take a moment before pulling the trigger on that new cottage. Honestly, it doesn’t look like cottage prices will drop by much any time soon. And just as with standard residential purchases, you need to your have your financing lined up. There’s no question. Current interest rates are making cottage mortgages tough to negotiate – and tough to afford.
There’s a wave of “buyers’ remorse” out there, and some who purchased during the COVID frenzy are now confronted with the reality of those high interest rates and trying to divest. And, some of their properties aren’t all that desirable, i.e., on tiny lots, weedy lakes, and unattractive exposures, and unfortunately for them, buyers aren’t biting. In the Kawarthas, in August 2022, there were 116 properties listed – only 33 sold; in August 2023, there were 179 listings and 36 sold. Pretty close transaction levels, but a lot more inventory in 2023.
Prices and interest rates are keeping buyers at bay, but eventually, as more inventory becomes available, power will shift away from the seller, making it a more balanced market. Sellers will have to get more realistic and it will take a while for them to get aligned with what buyers will be willing to pay.
PATIENCE! If you’re serious about joining us cottage owners, it will be worth holding off on the cottage dream a little longer to see if / when prices drop and interest rates decrease. In the meantime, get busy figuring out how you’re going to finance that dream.
