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Toronto’s real estate mania hits Muskoka cottage country

A large cottage stands on an island in this aerial photograph taken above Muskoka, Ont. The area is attracting American investors who want a rustic retreat that comes with 800-thread-count sheets.

James MacDonald/Bloomberg

It seems impossible to find a haven from Toronto's real estate bidding wars in 2016 – even for buyers looking as far afield as Muskoka's cottage country.

Scrapping over properties on the "big three" Muskoka lakes has resulted in cottages selling above the $1-million or so asking price.

Paul Crammond, a real estate agent with Chestnut Park Real Estate Ltd. in Port Carling, says he's seen more multiple offers this year than in any year since the market peaked in about 2006.

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Most of the competition has been for cottages in the $1-million to $1.3-million bracket on Lake Joseph, Lake Rosseau and Lake Muskoka, he says.

"On the big three lakes, there's a real shortage of good listings."

On a recent Thursday, Mr. Crammond listed one cottage with an asking price of $1.195-million. In less than four hours, an offer had landed on the table, but the buyer had attached numerous conditions.

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Mr. Crammond advised the seller to turn the conditional offer down and instead set a deadline for Sunday.

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"We did not deal with the bully on Thursday. We said you're welcome to come back on Sunday afternoon."

The bully chose not to come back on Sunday but three other prospective buyers did. The cottage sold for $1.305-million.

In the $750,000 to $1-million range, any Muskoka cottage that's not falling apart will sell within a week or two, he adds.

Already this year on Lake Joseph, a parcel that included two cottages, two boathouses and two vacant lots sold for $11.4-million. Another Lake Joe cottage sold for $9.3-million.

In late July, Mr. Crammond says, statistics from the broader area extending from Haliburton through Muskoka and Orillia show that 94 properties had changed hands at above $1-million for the year-to-date.

At the same time last year, 80 properties had sold in that range.

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In the $750,000 to $1-million segment, 88 sales were logged year-to-date compared with 49 last year.

In the $500,000 to $750,000 tier, 228 properties had new owners by late July compared with 143 at the same time last year.

Meanwhile, listings across most segments have shrunk.

"That's a double whammy," he says.

An entry-level budget for a Muskoka cottage on the mainland is $650,000 to $700,000, and that's on a small lot.

"If it doesn't need a lot of work and it's a decent size, either it's on a cliff or in a swamp or beside a marina."

Mr. Crammond says he's heard from buyers who have decided that buying a more expensive house in Toronto is so formidable that they're renovating their existing home and buying a cottage.

"Some people are saying, 'if we can get on the mainland for $700,000 to $800,000, that's what we're going to do.'"

Mr. Crammond says baby boomers bought a lot of vacation properties between 2000 and 2007, driving double-digit increases in prices many years. After the financial crisis of 2008, the market ground to a halt and never fully bounced back.

In many cases people who are spending millions for a cottage are trading up to a more desirable lake. A growing trend, he adds, is for parents to be shifting to the lake that their kids' friends are on.

"There's a huge concern over drinking and driving," he says, explaining that parents don't want their older kids to drive a car or boat home from a party. "So many buyers are extremely specific about where they want to be up here."

But others are getting into cottaging for the first time.

"In the over-$4-million segment, we are seeing first-time buyers."

Mr. Crammond has yet to see a lot of American or overseas buyers attracted by the relatively low value of the Canadian dollar. He has, however, heard from a number of Canadian ex-patriates who work in other countries.

They often know Muskoka and they're paid in U.S. dollars so they are motivated to buy a cottage now that the U.S. dollar has soared compared with the loonie.

As a result of so much demand for luxury, Mr. Crammond says that more builders are buying vintage cottages, tearing them down and replacing them with much more modern and luxurious buildings.

A number of build-for-resale projects are included in the 23 listings in the segment above $5-million on the big three Muskoka lakes.

Mr. Crammond says that because land has become so expensive, builders need to spend a year or two building a very high-end cottage in order to make a profit.

They typically spend between $1.3-million to $2.5-million for a property with at least 300 feet of prime shoreline so that they can obtain regulatory approval to build a two-storey boathouse.

"That's where they can see the jump in value."

They outfit the cottage with such amenities as a garage, granite landscaping and sports courts.

"They're going to need to sell it for $5-million at least."

But not all properties are going to developers.

Mr. Crammond has one $15.5-million listing – a seven-bedroom cottage on Lake Joseph – that he expects to sell to someone who wants a family retreat.

"Edgestone", as the estate is known, has 2,000 feet of shoreline and 29 wooded acres of land. The property consists of five lots and four of them are vacant, says Mr. Crammond, so the buyer will likely be someone who has deep pockets and values privacy.

"That's a rare buyer."

But as Muskoka becomes more and more developed, acquiring such an uninhabited expanse is increasingly difficult.

"You just don't find that anymore – particularly on the mainland. You own almost the whole bay and almost 30 acres of land."

Anita Latner of Anita Latner Realty Inc. thinks this summer's surge in sales is largely a result of the hot and sunny weather in 2016. The previous two summers were cooler, with more rain.

"If the weather's good, our market's good because everyone's in the mood," she says. "If the weather isn't good, no one's buying."

Ms. Latner adds that even the winter months saw an uptick in sales this year because the weather was relatively mild compared with the brutal cold of the previous two years.

Ms. Latner says that buying a cottage is a much more emotional purchase than buying a house because so many family memories are formed at the lake.

"It's not just Thanksgiving dinner or Sabbath dinner or a holiday. You have this multigenerational use of your cottage."

Ms. Latner says she has noticed that the power boats and water skiing that used to dominate cottage life are giving way to an appreciation of nature.

"I see at least one kayak at every cottage. It's so sweet to slip right into the water."

She adds that people are becoming more interested in preserving and exploring marshes than obliterating them.

"That's a trend that's very welcome because it's better for the environment."

She adds that kayaks can go between little islands and into shallow areas that motor boats can't.

"You can get so close to the loons, it's unbelievable. That will chill you out more than four martinis."

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