COTTAGE LIFE
FRESH AIR, BARBECUES, LAKES — AND HOUSING BIDDING WARS, THANKS TO COVID.
Bidding wars are to be expected when buying a house in a big city market, but now they have spilled beyond even the suburbs to otherwise calmer, more remote areas, known as peri-urban regions.
The pandemic-driven outward migration of households from central parts of the city to the towns forming the extended urban boundary has generated quite a lot of hype. Nowhere is this hype more visible than the cottage country surrounding the Greater Toronto Area (GTA).
It used to take months to sell a cottage before COVID-19 hit. Now, such homes are being sold within days, sometimes even hours, of being listed. Offer nights and multiple bids are the new norm, and they have delivered both unexpected riches to many cottage country sellers and loads of disappointment for outbid buyers.
real estate professionals in the famed Muskoka region north of Toronto initially panicked when the lockdown in March 2020 shut things down. However, a once-in-a-lifetime turnaround in housing markets took place within weeks. Cottage country realtors have not been this busy in years and there are no signs of a sharp slowdown on the horizon.
The demand for cottage country dwellings has increased for two reasons. The first is the rise of working from home or teleworking, making it possible for knowledge economy professionals to live and work from spacious residences near nature and water. even if they can only partially work from home, they can trade in their urban dwellings for a cottage and a pied-à-terre in the city for the days when they must visit work.
Second, it is not apparent when vacationers may board a plane for trips abroad. A holiday within commuting distance is the compromise, which has increased the demand for vacation properties near urban centres.
In remote towns where multiple bids were once unheard of, the new norm involves offer nights that turn housing markets into an auction of sorts, where the bidders are at a unique disadvantage since they do not know what others have already bid. The fear of missing out kicks in, and some end up bidding outrageous amounts that they would otherwise not have if the other bids were not kept secret.
Kevin Ali, the broker of record with Zolo realty, is all too familiar with the hyperactive housing markets in Ontario’s cottage country. He noted that a recently listed house in Severn, some 165 kilometres north of downtown Toronto, received more than 70 offers. The two-bedroom dwelling sold within four days and for almost twice the list price.
but there is more driving the hype than just the pandemic-driven demand for recreation properties.
One factor is the chronic undersupply of decent waterfront properties. The number of buyers seeking such properties far exceeds the number of dwellings listed that meet the necessary criteria. Another factor is that some sellers are listing their properties at prices far less than comparable sales to attract buyers. The waterfront property in Severn was strategically priced at less than $400,000 to attract attention — and it did.
Of course, that’s anecdotal evidence of the demand, but let’s look at the empirical evidence to see whether this cottage country gold rush is due to a shift in market demand, or is merely because there isn’t enough housing.
We asked the Canadian real estate Association (Crea) to provide custom tabulations showing how sales activity changed once the initial restrictions on mobility and assembly were relaxed in May 2020. We specifically focused on the cottage country markets to the north of the GTA, namely the barrie district, Kawartha Lakes, Muskoka and Haliburton.
These markets rebounded in July 2020 with unprecedented high levels of sales. but there is a catch. The housing markets near Toronto have been struggling since early 2017, when the Ontario government introduced the foreign homebuyers’ tax and new rental regulations. The bump in July 2020 sales, therefore, seems large relative to the sales since 2017.
Prior to 2017, cottage country housing markets had been steadily growing since the Great recession, with sales in 2015 and 2016 reaching new heights. For example, sales in Kawartha Lakes in June 2015 were higher than those recorded in July 2020.
What is different now is that a larger pool of prospective buyers has jumped into the market, competing for even fewer properties. The relatively high demand has put upward pressure on housing prices in cottage country.
CREA’S Composite House Price Index (HPI), an estimate of average housing prices that controls for housing quality and size, shows that housing prices in Simcoe County, also north of Toronto, accelerated faster during 2020 than they did in the GTA. Similarly, the growth in housing prices in barrie, another area north of the GTA, was faster than that in urban centres to the south.
Cottage country housing will continue to attract city slickers in large numbers while the pandemic-related uncertainty remains. As a result, bidding wars will continue to be fought for scarce waterfront properties.
Once more housing is made available by prospective sellers, who have been patiently watching the markets from the sidelines, cottage country markets are likely to return to calmer conditions to match the serene and tranquil environments that distinguish them.