Ontario cottage boom fuelled by people inheriting money from rich parents
Summer is fast approaching, and with it, the peak of cottage season in Ontario. But amid affordability challenges in real estate markets across the province, fewer people can afford to take on a second property entirely for recreational purposes.
Unless, of course, you happen to be sitting on a mountain of inheritance — a group large enough to help a handful of cottage country real estate markets buck the recent trend of declines.
According to RE/MAX Canada's 2023 Cottage Trends Report, recreational markets saw record-setting sales in 2022, but the new year has brought more balanced conditions. The majority of Ontario recreational markets — at 67 per cent — have balanced out, though a few markets are still drawing significant interest from buyers.
Ontario's red-hot cottage country housing market could face a frigid cooldown https://t.co/Rn7H7kz9KD #Ontario #RealEstate— blogTO (@blogTO) June 22, 2022
The Muskoka, Haliburton and Greater Sudbury, Windsor-Essex, and the Manitoulin/French River areas remain hot, specifically among buyers in the Generation X demographic.
RE/MAX's trends report states that GenXers now lead the pack in recreational property transactions, driving activity in a whopping 91 of the regions surveyed.
A portion of this activity is almost certainly the result of wealth transfer from the Baby Boomer generation, which is expected to hand off approximately $1 trillion of riches to younger generations in the coming decades.
"It's interesting to see Gen X gaining more of a foothold in recreational markets across Canada. Demand, coupled with the desire to own and keep these properties in the family, may further impact already low inventory levels in this segment of the market," says Christopher Alexander, President of RE/MAX Canada.
Alexander adds that these cottage purchases allow families to continue generating wealth through land value, saying, "recreational properties are always a good addition to any real estate portfolio, especially given the long-term ROI that they typically yield, making them an excellent opportunity for inheritance aspirations as well."
This is indeed the motivation behind many of these investments, according to a Leger survey conducted on behalf of RE/MAX Canada that found 51 per cent of Canadians who own or plan to own a recreational property cited passing the property down to family as a key motivator.
The survey also found 42 per cent of cottage owners are holding onto properties in hopes of passing them down to family members, while 56 per cent already have or plan to put their property in a beneficiary's name.
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