As the summer heat settles in Canada, cottages are becoming more affordable, but rising inflation and interest rates are putting a damper on the plans of first-time buyers, according to real estate experts. With the Bank of Canada recently raising its key interest rate and the possibility of future hikes, it’s worth considering whether now is the right time to enter the cottage market.
While there is still demand for cottages, many first-time buyers are taking a step back as existing owners try to keep their vacation homes in the family. The current interest rate environment has made affordability a challenge for many people. However, there are still instances of multiple offers in areas of Ontario and western Canada for well-priced properties.
A recent survey by ReMax revealed that 69% of Canadians are hesitant to invest in a cottage due to economic uncertainty. Despite this, cottage prices have already dipped and are expected to continue declining in many parts of the country. Royal LePage predicts a modest decrease of 4.5% in the aggregate price of single-family homes in Canada’s recreational regions, with the exception of Alberta, which is expected to see a slight increase.
Quebec is anticipated to see the largest decline of 8% compared to the previous year, with an estimated price of $343,528 for a recreational single-family home. Ontario is expected to have a 5% dip in the aggregate price, reaching $603,060. The Atlantic provinces and the Prairie provinces would see a 3% decrease, while British Columbia’s aggregate price remains above $1 million with a 2% drop.
Mark Pedlar, a broker with ReMax Bluewater Realty Inc. in Ontario’s Grand Bend area, has noticed a softening of the cottage market with a 10% average price decrease in that region. Inventory has increased, but sales have decreased, creating a buyer’s market. Pedlar believes there is good value for sellers, but even better value for buyers who missed out on opportunities last year.
The increase in mortgage payments has made cottages and other real estate properties more difficult to afford. Many cottage owners are relying on rental income to make their investments worthwhile. If a cottage can be purchased and rented out, it provides an opportunity for secondary property ownership.
Despite recent listings, there is still not enough inventory to meet the current demand for cottages. Many owners are reluctant to sell because they want to pass down their cottages to future generations. Existing cottage owners who are looking for upgrades are waiting for the right time to make a move, depending on their financial circumstances.
Before purchasing a cottage, buyers must consider their financial situation. Overextending yourself to own a property is not advisable. However, in the long term, owning a home or cottage can be a profitable investment. Alongside the price tag, prospective buyers should also consider factors like location and suitability for their recreational needs. It is crucial to research and find a property that meets specific requirements, as the average cycle for a cottage is longer than that of a home. Ultimately, buyers should aim for long-term enjoyment and potential for future appreciation.
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