Cottage prices may spike 7%, firm says
Re/Max report finds few new listings over spring
Canada’s cottage prices are forecast to rise to almost seven per cent by the end of the year as homeowners choose to hold on to their properties and pent up demand from buyers is expected if interest rates drop as expected.
While some cottage owners will sell their property before the capital gains tax comes into effect this June, it won’t have a big enough impact on the overall market, an expert says.
A flood of listings hasn’t hit Canada’s recreational property market this spring and is unlikely to transpire this year, according to Re/ Max Canada’s 2024 cottage trends report on Tuesday.
Despite high interest rates ballooning mortgages, cottage owners are holding on to their properties, resulting in fewer listings and sales. But if the Bank of Canada cuts rates, which economists forecast will take place in the summer, buyers will jump into the market placing upward pressure on the demand side, said Christopher Alexander, Re/ Max Canada president.
“We see 2024 as a rebound year,” he said. “Inventory will be a challenge in some markets more than others but there’s a renewed appetite for cottage ownership and many people are waiting for interest rates to come down.”
Ontario realtors have said they expect an “uptick” of new listings in the province as cottage owners intending to sell in the coming years off-load their properties sooner due to the capital gains tax increase coming into effect June 25 — which would hit owners with a higher tax bill when they sell if their capital gains are greater than $250,000.
But the rise in new listings in the
province won’t have a significant impact on the overall market, said Alexander.
“We’ve heard that some realtors have been getting a lot of inquiries from cottage owners about the capital gains tax and whether they should sell now,” he said. “But once they do the math on the capital gains they realize in most cases they’ll need to price super aggressively to be sold and close before the deadline. It’s not worth it for majority of sellers.”
Ontario’s cottage market has been sluggish in 2023 and the beginning of the year with prices falling in the first quarter of 2024 in 54 per cent of markets analyzed in the report. Muskoka was down five per cent year over year in the first quarter compared to the same time last year, while Southeast Georgian Bay was down 28.7 per cent.
But for the remainder of the year, Re/Max brokers and agents expect the price of Ontario cottages to increase in 72 per cent of recreational markets — Muskoka will see prices rise by five per cent and Peterborough and the Kawarthas could see a dramatic hike of 33 per cent.
“It’s hard to say why some regions do better than others,” Alexander said, “and at this stage we have too little data to support any big trends.
In the Kawarthas prices went up because sales increased from one to nine properties in the first quarter of 2024 compared to the first quarter of 2023. Each market is just different and we need to see how the year plays out for each region to get a fuller picture.”
Some regions in Ontario saw promising sales in the first quarter, but that’s because 2023 was an incredibly slow year, he added.
“We had the lowest sales since the late 1990s, so there’s really nowhere to go but up,” he said. “There’s a weird stalemate between buyers and the Bank of Canada but once the first domino falls we’ll see the market become very competitive.”