Can You Afford a Cottage?

Cottages have become hot commodities, whether in the Ontario real estate market or in the British Columbia recreational homes sector. In recent years, more households have decided to use cottages as their primary residences, as many people enjoy the flexibility of remote work. Others, buoyed by historically low mortgage rates a few years ago, took advantage of the opportunity and purchased a cottage up north.

With market conditions normalizing, the cottage market has changed, be it six percent mortgage rates or an increase in the capital gains tax. It might seem counterintuitive, but real estate experts assert that this could be one of the best times to purchase a cabin, chalet, or other type of recreational property since supply is likely to increase, be it in the Kawarthas or Muskokas in Ontario or the Gulf Islands in BC.

Are you considering buying a cottage in the middle of nowhere or by a waterfront? Remember, the economic landscape has largely returned to where it was pre-2019, meaning more people are back at the office, and conventional home prices have returned to their upward trends. As a result, it is vital to determine if this is something you can afford and if it suits your lifestyle.

Let’s take a deeper dive into Canada’s cottage market:

Can You Afford a Cottage?

Cottages used to be affordable, allowing many homeowners to have a recreational property in addition to their primary residence. It is a nice respite from city life. However, with many Canadians flooding cottage country for permanent residence, prices have skyrocketed over the last couple of years. However, prices have come down a bit. New research has shown more than half (54 per cent) of Ontario’s cottage markets, for example, experienced an average price decline of between five and nearly 29 per cent over the past year.

Here is a look at the state of some of the largest cottage markets in Canada as we kicked off “cottage season” and the price forecasts for the remainder of the year:

Whistler, British Columbia

• Average Residential Price: $1.75 million
• Annualized Change: +7.5 per cent
• 2024 Price Forecast: N/A

Canmore, Alberta

• Average Residential Price: $1.04 million
• Annualized Change: +8.1 per cent
• 2024 Price Forecast: +5 per cent

Edmonton Lakes, Alberta

• Average Residential Price: $477,104
• Annualized Change: +22.7 per cent
• 2024 Price Forecast: +3 per cent

Grand Bend, Ontario

• Average Residential Price: $839,476
• Annualized Change: -8 per cent
• 2024 Price Forecast: +15 per cent

Southern Georgian Bay, Ontario

• Average Residential Price: $950,000
• Annualized Change: +2.1 per cent
• 2024 Price Forecast: 3 per cent to 6 per cent

Muskoka, Ontario

• Average Residential Price: $1.42 million
• Annualized Change: -5 per cent
• 2024 Price Forecast: +5 per cent

Rideau Lakes, Ontario

• Average Residential Price: $513,238
• Annualized Change: +8.1 per cent
• 2024 Price Forecast: -5.5 per cent

Prince Edward Island

• Average Residential Price: $324,900
• Annualized Change: +5 per cent
• 2024 Price Forecast: 0 per cent

Annapolis Valley, Nova Scotia:

• Average Residential Price: $119,750
• Annualized Change: -47.8 per cent
• 2024 Price Forecast: +5 per cent

Cape Breton, Nova Scotia

• Average Residential Price: $276,982
• Annualized Change: +6.3 per cent
• 2024 Price Forecast: +8 per cent

St. John’s, Newfoundland and Labrador

• Average Residential Price: $321,750
• Annualized Change: -9.1 per cent
• 2024 Price Forecast: +6.7 per cent

The recreational markets could experience notable developments in the coming months. Market observers will absolutely watch how the cottage sector responds to lower interest rates, an injection of new supply in response to the federal government’s higher capital gains tax, and the continued return to office policies. It will undoubtedly be a balancing act for buyers, sellers, and real estate agents.

Still, the surplus of trends should not discount the incredible investment that a household can make by purchasing a cottage.

Those who have already gained a foothold in the recreational property market are determined to hold on to this asset, despite mounting affordability concerns across the country.

Christopher Alexander, President, RE/MAX Canada

“Those who have already gained a foothold in the recreational property market are determined to hold on to this asset, despite mounting affordability concerns across the country,” said Christopher Alexander, the President of RE/MAX Canada. “Even the change to the capital gains tax, that will take effect on June 25, won’t spark a widespread flood of new listings and sales by cottage owners trying to get in under the wire given the narrow window.”

In fact, it is estimated that nearly two-thirds (64 per cent) of Canadian cottage owners plan to hold onto their properties this year.

But could the cottage boom start tapering off as the year progresses?

Many factors suggest that the cottage market could remain intact, even heading into 2025. The Canadian economy, while slow, has averted a recession. The labour market is still tight. The Bank of Canada (BoC) could cut interest rates soon amid the deceleration in inflation. With all of these developments at play, some industry experts say that now could be an opportune time for households to dip their toes in the cottage market and enjoy a place to escape to when the going gets tough.

“There’s still inventory out there, if people are looking,” Lake Huron area RE/MAX broker Brian Coombs told The London Free Press. “I’m finding right now it’s a good time for buyers to buy. Prices are down a bit; there’s really not much other buyer pressure.”

Suffice it to say the cottage market has turned into a chess match between buyers and sellers.

Are Cottages Still an Affordable Option?

For years, cottages and holiday destinations in rural British Columbia or Ontario were affordable alternatives to conventional properties in the big cities. Like everything else in the overall economy, inflation has changed the pricing structure of assets and cities. In recent years, every single type of unit has been in demand, be it a 300-square-foot condo in the heart of downtown Toronto or a cabin in the Albertan woods. Of course, higher mortgage rates and exhausted savings have resulted in a reversion to the mean. That said, it takes some due diligence, research, and patience to find gems. Indeed, prices have dipped a bit, depending on where you look. From the Rideau Lakes in Ontario to Summerside in the Maritimes, there are plenty of cottage-living opportunities that will not break the bank.

It is also worth noting that many jurisdictions have implemented short-term rental bans or introduced new measures to limit allowances. Ottawa recently installed a new measure rejecting income tax deductions on short-term rentals that do not comply with laws. Will these efforts free up supply? If so, it could make cottages even more affordable.

Many families say that cottages are exceptional investments for current and future generations. Whether the cooling trends can seep into cottage country remains to be seen. For now, take the family to the Kawarthas or South Okanagan and enjoy the sights and sounds of cottage life!