Recreational property prices expected to rise 6.8% in 2024
Cottage owners choose to hold on to properties, despite interest rates and affordability concerns.
A flood of listings hasn’t hit Canada’s recreational property market this spring, and is unlikely to transpire this year, according to findings from RE/MAX Canada’s 2024 Cottage Trends Report. Despite the affordability challenges and higher interest rates that characterized the 2023 real estate market, Canada’s cottage owners are choosing to hold on to their properties in 2024 rather than selling off – a trend that’s likely influenced by the desirable quality of life alongside the prospect of future returns on recreational property ownership.
Looking ahead, RE/MAX brokers and agents in Canada are anticipating an increase in recreational prices by 6.8 per cent. Meanwhile, the number of sales is expected to rise in the majority of regions analyzed (61.9 per cent), with increases ranging from three per cent upwards of 50 per cent this year.
Demographic shift in the market
According to RE/MAX brokers and agents, families and young couples have become a significant driver of activity in 59 per cent of recreational markets across Canada.
Historically, sales have primarily been propelled by retirees, who were the dominant demographic in 91 per cent of markets analyzed by RE/MAX in 2018.
This shift can be attributed to the lifestyle and flexibility afforded by hybrid and remote work.
According to a Leger survey commissioned by RE/MAX, the quality of life found in recreational markets, and the ability to work remotely, have prompted more than one third of Canadian recreational property owners (38 per cent) to spend more time at these secondary properties than they did before the pandemic.
The rate is higher among younger buyers: 55 per cent among Gen Z (ages 18-24), and 57 per cent among Millennials (ages 25-39).
Policy and regulation influences on recreational market
In an effort to improve the availability of housing supply, short-term rental bans have begun to materialize in some provinces across the country, while others look to introduce new measures to limit allowances. In the wake of this, the Leger survey commissioned by RE/MAX found that these restrictions have not swayed recreational property owners to sell, with 58 per cent remaining steadfast in their investment.
By comparison, only 29 per cent are looking to sell, due to the inability to generate the rental income initially anticipated when they purchased their recreational property.
Canadians are split on whether these policies have made buying and selling more complicated, and whether they’ll buy/sell as a result (35 per cent say they won’t; 31 per cent say they will).
Short- Term Rentals-
In response to the country-wide housing shortage and affordability crisis, the federal government has committed $50M as part of the 2024 budget, to help municipalities restrict short-term rentals. The idea here is that this will free up long-term rental housing.
Starting in 2024, Ottawa enacted a new measure denying income tax deductions on short-term rentals that don't comply with laws.
Cities have different rules around short-term rentals, including caps on rental days, tax obligations and special zoning requirements. Toronto and Vancouver limit the days you can rent out your primary residence annually, and you must contribute a percentage of your gross revenues to the city. In other locations, such as Blue Mountain, Ontario, new by-laws may restrict short-term rentals to properties that are grandfathered in or located within specially designated zones.
Even if the city permits rentals, your building’s by-laws could shut down your plans before they even start. Many condominium associations explicitly prohibit short-term rentals, rendering such an investment a non-starter.
Capital Gain Tax –
The federal government has announced changes to capital gains tax, as part of its 2024 budget.
Capital gains are the proceeds of the sale of an asset, such as a stock or business. The change includes raising the inclusion rate from 50 per cent to 66 per cent on capital gains above $250,000 for individuals, and all capital gains for corporations and trusts.
Principal residences would not be subjected to a capital gains tax, however Canadians selling non-principal residences, such as cottages, vacation homes and rental properties, would be subjected to the new inclusion rate.
Did you know? Canada did not have a capital gains tax until 1972.
Regional Deep-Dive
RE/MAX Canada brokers and agents were asked to provide an analysis of their local market activity for the first quarter of 2024, as well as an outlook for the rest of the year. Overarching regional trends pinpointed by the RE/MAX network include:
• Families and couples are the primary drivers of activity in the recreational property market – 82% and 68% respectively, retirees at 59%, and investment buyers at 41%.
• 54.5% of regions in Western and Atlantic Canada have experienced increased inter-provincial migration activity, while Ontario witnessed increased intra-provincial migration activity.
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