Canada’s vacation property market feeling the heat

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Signs that something was different started showing in January. In the Muskoka region, property buyers started scooping up vacant lots while they were still covered in snow, rather than their usual habit of waiting until it melted.

The desperation to own a slice of land, so familiar to anyone in the Greater Toronto Area, was bleeding into cottage country.

"It was quite sudden," says Heather Scott, a sales representative with Forest Hill Real Estate Inc. in Port Carling, Ont. "Normally, we wouldn't see much vacant land sell at all in the winter months."

The region's real-estate market kept breaking records through the spring, according to the Lakelands Association of Realtors. There were 173 units sold in April alone, the most recorded for that month, up 3.6 per cent from April 2016. The median price for waterfront homes rose to $485,000 – up 30.4 per cent. Meanwhile, inventory is falling, making multiple offers and offers-over-asking more common than Ms. Scott has seen before. And she says the time between listing and sale has shrunk this year from a range of 20-to-40 days to five-to-10 days.

In regions near Canada's hottest urban real-estate markets, demand for recreational properties – cottages, cabins, camps, or chalets, depending on where you're from and what you use them for – is starting to emulate that of their Monday-to-Friday neighbours. In Muskoka, north of Toronto, and Whistler, north of Vancouver, for instance, buyers are racing to lock down getaway properties or to downsize from their big-city homes for a leisurely retirement while prices are still in reach.

"Canada is kind of on sale now because our dollar is so low," says Christopher Alexander, regional director for Re/Max Integra Ontario-Atlantic Canada Inc. Regions around Muskoka and Whistler – as well as the Kawarthas and Okanagan – are geographically positioned to feel spinoffs from denser neighbours, but he says interest in vacation properties is strong across the country, as websites such as Airbnb make it easier to rent the secondary homes out to offset costs.

This month, Christie's International Real Estate released a report indicating luxury second-home and vacation-home sales had risen 36 per cent in Canada last year. In the same report, Chris Kapches, chief executive of Christie's affiliate Chestnut Park Real Estate Ltd., said luxury homes in the Muskoka market saw values jump 20 per cent in 2016 – thanks to spillover from Toronto.

He sees buyers treating vacation properties as an asset class that will deliver not just emotional, but fiscal returns. "If we don't get a plethora of new listings coming out, we'll find ourselves in a supply crunch and could see prices rise dramatically," he said in an interview. A recent surge of listings in the GTA appears to be having a cooling effect on the city's red-hot market.

While demand for homes in the area worth $700,000 or less is high right now, Re/Max North Country Realty Inc. broker Hugh Nichols said it's a "slower cycle" for sales of homes listed at $2-million or more.

Through mid-May, Mr. Nichols has found that on Muskoka's "big three" lakes – Lake Muskoka, Lake Rosseau, and Lake Joseph – unit sales by his team are up 7 per cent and prices are up 24 per cent. While the market was sidelined during the economic downturn a decade ago – it was a tough period for vacation-home markets everywhere, since they depend on disposable income – values have rebounded.

Many baby boomers are downsizing to get their piece of cottage country while they can still afford it. But the area has long had American interest, and it's being spurred further thanks to the low loonie. Offshore buyers are slowly creeping in, too, Mr. Nichols says. He suspects foreign investment will increase in the coming years, as "most people haven't realized that the pending rules for the nonresident [housing buyers] tax does not affect Muskoka."

Different regions have varying levels of demand. In Nova Scotia, Mr. Alexander says, German buyers are helping prop up the cottage market. In Re/Max's 2016 recreational property report, the company also found high interest in pockets such as Quebec's Eastern Townships, and Tofino, B.C.

While the oil downturn gouged Alberta's broader real-estate market for much of the past two years, the vacation-home hub of the Columbia Valley, west of Calgary just over the B.C. border, has actually seen sales trending up the last few years.

Kim Collens, partner with Royal LePage Rockies West Realty in Invermere, B.C., says Albertans still make up 73 per cent of the region's buyers. Why? "We have 21 golf courses, probably five ski hills, and two lakes within a two-and-a-half-hour drive of Calgary," she says.

B.C.'s Okanagan region, meanwhile, is seeing Lower Mainland buyers outnumber Albertans for the first time in a long time. They're buying vacation properties, investment properties, retirement properties. "It's moving prices up," says Tanis Read, president of the Okanagan Mainline Real Estate Board.

In Whistler, the market is "very brisk," especially for units priced less than $2-million, says Ann Chiasson, broker-owner with Re/Max Sea to Sky Real Estate. Vancouver is its biggest market for buyers, and she says "we would mirror" the changes Muskoka is undergoing because of its proximity to Toronto.

Just like around Muskoka's "big three" lakes, room for new development is low closer to the mountain resort. When 24 lots were recently listed for the new WedgeWoods Whistler development – halfway to Pemberton to the north – 19 were sold in two weeks. Another 50 will be listed soon, Ms. Chiasson says. "I expect they'll sell in two weeks, too."

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