Covid 19

COTTAGE REAL ESTATE MARKET REPORT

COTTAGE REAL ESTATE MARKET REPORT

2021 MUSKOKA REGION

The Muskoka and area recreational real estate market has changed dramatically in the past few years and particularly during the pandemic. At the beginning of the Covid-19 crisis, the entire real estate market in southern Ontario came to an abrupt halt. At that time, in the early spring of 2020, it was hard to imagine that the market would not only recover but would out-perform in an unprecedented fashion. The charts below provide stunning illustrations of just how dramatic this change has been. The data represents the entire Muskoka and area waterfront market.

The various sub-markets, Muskoka Lakes, Huntsville/Lake of Bays, Algonquin Highlands, Haliburton, with minor variations, have performed in sync with the overall market. In retrospect the change in the market seems obvious and inevitable – the need and the desire to escape the density of large urban centres, the search for space and sanctuary, the desire and ability to work from home/cottage, and as we have discovered, in the upper price points, the acquisition of trophy properties, becoming a further asset class of those fortunate enough to be able to purchase high-end properties.

It will be no surprise that based on the evolution of the market over the course of the pandemic that the average sale prices for waterfront recreational properties have increased exponentially since 2019, as illustrated below.

In just four years the average sale price for all Muskoka waterfront properties sold has increased by an eye-popping 59 percent, with the bulk of that increase taking place since 2019.

The other startling change in the Muskoka and area recreational marketplace is the almost unbelievable decline in available inventory. Less than 10 years ago the average sale time for recreational properties was more than a year, with some properties taking two or more years to sell. Even at the beginning of the pandemic on average, there were 6.1 months of inventory. As of October 2021 the months of inventory have declined to 1.7 months, a drop of 72 percent in only two years. In October of 2021, there were 323 active waterfront listings for the Muskoka region, a decline of more than 65 percent compared to the same period in 2019.

The Lake of Bays recreational market, although similar in many respects to the broader market and the Muskoka Lakes and Huntsville markets, diverges moderately. What is most striking is the months of inventory in the region. Like all submarkets, the length of time that it takes for properties to sell has improved dramatically since 2012, but as of October 2021, months of inventory comes in at 3.8, in sharp contrast to 1.7 months for Huntsville waterfront, 1.9 months for the Muskoka Lakes and 1.7 months of inventory for the recreational waterfront marketplace as a whole. Explanations do not immediately present themselves, but it could be ventured that the Lake of Bays market falls between the very expensive and high-end Muskoka Lakes market and the less pricey Haliburton Highlands marketplace, becoming an option for those that can’t afford the Muskoka Lakes but don’t want to venture to the Haliburton Highlands. It should be noted that even Haliburton properties have moved into the pricey category, although not as pricey as those selling on Lake of Bays and the surrounding smaller lakes.

The market has performed similarly in the Muskoka Lakes region, although the price point is substantially higher than all the other submarkets in the region, and inventory levels are lower. At the end of October, there were (on a year-to-date basis) 2.3 months of inventory, although active listings declined by more than 40 percent. The average sale price for all recreational properties sold in 2021 in this area, including smaller lakes, was $1,928,465, an increase of almost 10 percent compared to 2020. Average sale prices on Lake Rosseau, Joseph and Muskoka, the region’s most sought after and most pricey properties continued their upward trajectory throughout the year, reaching historically high levels.

As the chart below indicates, the average sale price for properties sold on the big lakes is now approaching $4,000,000. It is interesting to note that from 2006 to 2018 increases in average sale price were moderate. However, even before the pandemic, prices were starting to diverge from the historical pattern. During the pandemic, they exploded.

Although these numbers are startling, the average price for sales on Muskoka’s big lakes pales compared to the luxury market of the Hamptons. Muskoka’s big lakes regularly referred to as the “Hampton’s North”, are often compared to the Hamptons ( a 2-hour drive from New York ). In the third quarter of 2021, the average sale price for all properties sold in the Hamptons was $US11,889,000, making the Muskoka big lakes look inexpensive by comparison.

2021 has been an outstanding year for Chestnut Park and its agents. In 2021 Chestnut Park engaged in more than $600,000,000 in volume of sales, by far the strongest year in the brokerage’s history, 15 percent higher than 2020, and more than 100 percent higher than 2019. Chestnut Park’s agents have clearly captured the lion’s share of the recreational property market share in Muskoka. In Port Carling, Chestnut Park’s office outdistanced the nearest competitor office by almost 80 percent in dollar volume sales.

Peering into 2022, inventory shortages and rising prices will continue to make headlines and to plague the waterfront marketplace. Buyers have shown a continued interest in a virtual, tech-focused real estate experience – and aren’t necessarily in a rush to go back to the old way of buying cottages. Virtual tours, high-quality videos, detailed floorplans, and browsing listings on an app are just a few examples of pandemic-fuelled cottage-buyer tools we believe are here to stay.

Cottages, regardless of their size and grandeur, have always been part of the southern Ontario dream. The pandemic has focused even greater attention and increased the desire to own a recreational property. Owning such a property not only enables buyers to own and enjoy lakeside property but collaterally to invest in what is becoming a distinct and limited asset class. Mortgage interest rates will undoubtedly increase in 2022, but their impact will be negligible. Recreational property purchases are discretionary, and rates have a much lesser impact than on housing prices in an urban context.

This entry was posted on March 22, 2022 by Jim and Iris

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