Canadian cottage market expected to see price drop this year: Royal LePage
A recent report from Royal LePage is predicting a drop in prices for Canadian cabins and cottages this year as demand softens from economic uncertainty and low housing stock.
The Royal LePage Recreational Property Report, released on Tuesday, expects the aggregate price of a single-family home in Canada’s recreational housing market to fall 4.5 per cent this year to $592,005 compared to 2022.
Royal LePage’s aggregate home price is based on median prices, including for single-family, single-family waterfront and standard condominium homes.
“Despite a modest decrease expected this year, the national aggregate price would remain more than 32 per cent above 2020 levels, after two years of double-digit price gains in the country’s recreational real estate market,” the report says.
While Quebec and Ontario should see the largest price decreases year-over-year at eight and five per cent respectively, the report offers a hopeful outlook for Alberta.
The province is expected to be the only region in the country where recreational housing prices will increase this year at 0.5 per cent.
This all comes after the aggregate price rose 11.7 per cent year-over-year to $619,900 in 2022, the report says. In 2021, prices rose 26.6 per cent year-over-year.
“After two years of relentless year-round competition, Canada’s recreational property markets have slowed and returned to traditional seasonal sales patterns,” Royal LePage president and CEO Phil Soper is quoted saying in the report.
Soper says interest rate increases have less of an impact on recreational homes, given buyers tend to put more money down and borrow less. Earlier this month, the Bank of Canada announced it would be holding interest rates at 4.5 per cent after continuous increases since March 2022.
However, general consumer inflation and lack of inventory have “damped sales activity,” while recreational homebuyers tend to have the “benefit of time” to find the right property, he says. “Call it a want versus a need.”
FULL-TIME COTTAGE LIFE LOSING ITS ‘ROMANTIC SHINE’
An online survey of 202 Royal LePage recreational real estate brokers and sales representatives, conducted between March 1 and March 18, found 57 per cent are reporting lower inventory than last year.
Compared to pre-pandemic times, even more – 65 per cent – say inventory is lower.
“While low inventory poses a challenge for buyers looking for that special cabin or lakeside cottage, the coinciding contraction in demand has resulted in a return to more normal market conditions,” the report says.
The same survey also looked at cases where people moved and lived full-time at their recreational property during the COVID-19 pandemic.
Twenty-eight per cent of those surveyed said the trend of people now moving back to urban or suburban areas after relocating has become “somewhat common.”
However, 56 per cent described it as uncommon in their markets.
Those surveyed in Atlantic Canada were the most likely at 46 per cent to say this trend has become somewhat common.
“During the pandemic, with offices closed and people working from home, Canadians discovered that a recreational property could double as a principal residence, complete with capital gains exempt status,” Soper said.
“With high-speed internet now readily available in many rural markets, families flocked to recreational regions to put extra space between themselves and their neighbours and to take advantage of nature; particularly when cultural and sporting venues, shops and restaurants in cities were closed.
“Many urban businesses now require employees to be in the office at least a few days a week, making long commutes challenging. For many, living in cottage country full-time has lost its romantic shine, meaning we are back to viewing the cottage, cabin and chalet as a weekend and summer escape from urban living.”
The Royal LePage Recreational Property Report compiles insights, data and forecasts from 50 markets. Median price data was compiled and analyzed by Royal LePage for the period between Jan. 1, 2022, and Dec. 31, 2022, and Jan. 1, 2021, and Dec. 31, 2021. Data was sourced through local brokerages and boards in each of the surveyed regions. Royal LePage’s aggregate home price is based on a weighted model using median prices. Data availability is based on a transactional threshold and whether regional data is available using the report’s standard housing types. Aggregate prices may change from previous reports due to a change in the number of participating regions.