Ontario's red-hot cottage country housing market could face a frigid cooldown
After a scorching hot 2021, the Ontario cottage country real estate market could be facing a cooldown, with industry experts even suggesting a dreaded bubble that might not be too far from its bursting point.
Cottage country has always served as an escape from the big city. Aside from being far from the hustle and bustle, pollution and noise of Toronto, cottage country offers a comparatively affordable recreational real estate market.
Changing work patterns since 2020 have left former office drones feeling untethered, fostering an urban exodus and corresponding spike in demand across markets that were once dominated by recreational buyers seeking a summer getaway.
Now it's 2022, and people are returning en masse to offices, but that isn't the only issue facing cottage country real estate markets.
In addition to a downturn in demand, RE/MAX Canada reports that recent interest rate hikes by the Bank of Canada to fight inflation "could result in a number of scenarios, such as a hard landing for the Canadian economy, a decline in the stock market, or a drop in the housing sector."
The real estate agency's blog states that, according to economists, these conditions "will lead to a decline in sales and prices – just by how much remains to be seen. And recreational properties are already showing signs of decelerating in this rising-rate economy."
As the number one market associated with cottage life, industry experts are looking at Muskoka as a sort of canary in the coal mine for the broader recreational market.
And it ain't necessarily looking too good up there.
Non-waterfront sales in the region declined a whopping 34 per cent year-over-year in April to 530 units, while waterfront property sales fell at an even more pronounced rate, dropping by almost 60 per cent in April compared to the previous year, to 104 units.
Chuck Murney, the President of the Lakelands Association of Realtors, says that with supply levels at historic lows, "prices are still trending near all-time highs but have begun to show signs of topping out."
Muskoka waterfront property prices lept over 26 per cent annually to above $1.2 million, while non-waterfront prices climbed by more than 17 per cent to approximately $750,000.
Housing market analysts suggest that many cottage owners are unlikely to list their properties in the near future, but the pull of employers pressuring a return to their glitzy expensive offices could put external pressure on the cottage country market.
The hybrid working model's popularity with urban dwellers is lost on those working remotely from new purchases in cottage country.
At least some of these owners will likely face pressure to put their professional dreams above their property dreams and make regular appearances at the office.
And frankly, this might not be the worst time to cash in on the recent property value gains and pack your bags for a move back to the city, as experts talk of a pandemic-induced housing bubble.
RE/MAX Canada cites a report from the Bank of Montreal stating that "64 per cent of Ontario's cottage country, such as Haliburton, South Georgian Bay and the Kawarthas, are considered overvalued," a problem almost certain to face a market correction in the months or years to come.
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