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It became obvious as 2018 wound down that the recreational market place was not immune to what was happening on the broader economic front. Throughout 2018 borrowers in the Toronto and area market place were reluctantly pulling in their horns, forced to do so by rising interest rates and borrowing costs, mortgage stress testing, and a 15 percent foreign buyers tax. By the end of the year Toronto and area sales had (on a year-over-year basis) declined by approximately 15 percent and average sale prices were off by more than 4 percent. It is anticipated that 2019 will be a year of sluggish sales and some moderation in average sale prices, particularly for higher priced homes. The same market scenario will likely play out in recreational property markets as well.
Interestingly, sales volumes will to some extent be impacted by declining inventory levels. For example, in 2018, 1110 waterfront properties came to market in the combined Townships of Muskoka Lakes, Bracebridge, Gravenhurst, Lake of Bays and Huntsville, almost a 10 percent decline from the 1224 properties that became available in these regions in 2017. It is even more concerning when 2018 inventory levels are compared to 2016 and 2015. During these years 1419 and 1594 recreational properties respectively came to market. Between 2015 and 2018 inventory levels have decreased by more than 30 percent.
On Muskoka’s big Lakes (Lakes Joseph, Rosseau and Muskoka) the same pattern has emerged. In 2015 there were 515 properties listed for sale on the big Lakes. This year that number tumbled to 332, a decline of over 35 percent. The same is true for Lake of Bays and the big Huntsville Lakes, although that decline has not been as dramatic.
It is not surprising that with declining inventories, sales have also declined. Combined in the Township of Muskoka Lakes, Bracebridge, Gravenhurst, Lake of Bays and Huntsville there were 684 recreational properties reported sold in 2017. In 2018 that number dropped to 565, a decline of more than 17 percent.
There was a similar decline in sales on Muskoka’s big Lakes. In 2017 there were 220 recreational properties reported sold, a number that declined to 165 in 2018. This represents a 25 percent drop in sales, which is consistent with the decline in inventory over the same period. On the basis of percentages, the decline in sales of properties having a sale price of $3,000,000 or more was greater than properties having sale prices lower than that.
It is interesting to note that not only were there fewer higher priced properties that sold in 2018, but it took longer for these properties to sell in 2018. In 2018 all properties in this category sold, on average, in 66 days. In 2017, which was a record year for the market, all recreation properties sold, on average, in only 59 days. Between 2014 and 2016, recreational properties in this price point sold, on average, in 73 days. Days on market in 2018, therefore, were consistent with historical norms. Although days on market increased between 2017 and 2018, there was no difference in the ratio between sale price and list price. In both 2017 and 2018 all properties sold on average at 78 percent of their original list price, and at 95 percent of their final list price.
The Muskoka and area recreational market place is varied and not homogeneous. As a result, it is difficult to determine what happened to average sale prices in 2018 with any accuracy, especially given the categories of properties that have sold and the numerous recreational locations. But evidence indicates that the average sale price for properties reported sold on Lakes Muskoka, Rosseau and Joseph declined by 6.5 percent, from $2,211,372 in 2017 to $2,069,142 in 2018. If we include sales of properties (over $500,000) in the Lake of Bays and Huntsville region, the decline in the average sale price is approximately 7.5 percent, from $1,994,810 in 2017 to $1,843,627. Interestingly, sales data of all recreational properties combined, which includes lower priced properties, indicates a substantial increase in the average sale price year-over-year. In 2017 the average sale price was $450,000. In 2018 the average sale price climbed to $650,000, an eye-opening increase of 38 percent.
What does all this market information tell us? It appears to be giving us the same signals that the market is projecting in the greater Toronto area. Lower priced properties are very much in demand and when available are selling briskly, putting upward pressure on prices in this segment. The urban equivalent would be condominium apartments. In the greater Toronto area, average sale prices for condominium apartments increased by 11 percent. They are in demand primarily because they are affordable, even with the market pressures of increased borrowing costs and mortgage stress testing.
Under the prevailing economic landscape, the upper end of the market in the greater Toronto area has seen a considerable pull back, both in terms of sales volumes and average prices. The most recent data indicates a considerable decline in the sale of properties having a sale price of $2 million or more. In 2017, 3,435 properties were reported sold in this category. In 2018 only 2077 properties sold at this price point, a decline of almost 40 percent. Average sale prices for this category of properties declined by 8%. Although property sales in recreational markets in this price point are discretional to a greater degree than urban markets, they will not be entirely immune to these market pressures.
Notwithstanding these turbulent conditions, Chestnut Park’s Port Carling office managed to beat market expectations by exceeding the next closest competitor brokerage office by more than 50 percent in dollar volume sales. Chestnut Park’s sales representatives were responsible for more than $250 Million in recreational property sales. Given the lack of inventory and the market pressures that have been discussed in this Report, this is a sterling performance.
As we go forward in 2019 the market challenges that have been discussed will continue to be at play. 2019 will be a transitional year when less foreign capital, increased borrowing costs and stricter financing qualifications will impact the decision making of buyers and sellers. Added to these factors is the lack of inventory and supply in all price points, but especially properties having a value of less than $1.5 Million. As the year unfolds pricing will be the key to sales in the new normal that buyers and sellers of recreational properties will be adjusting to.
Prepared by Chris Kapches, LLB, President and CEO, Broker — with tweaks by Jim Gardiner, Broker
This entry was posted on February 4, 2019 by Jim and Iris
“Thank you for the memorable sales and closing experience of finding the cottage of our dreams. A perfect fit for our needs.”I & E – Lake Muskoka cottage buyers
“Jim and Iris Gardiner were both amazing to deal with. A truly professional team. They shared a great deal of knowledge with us and really shed important light regarding potential Island Cottage ownership – all the pros and cons. Not only did they sell our existing cottage in 24 hours for much higher than our asking price they helped us find our new slice of paradise on Lake Muskoka in a very tight market. We are thrilled with our new cottage and love being on Eilean Gowan Island! We would highly recommend either Jim or Iris for any of your Real Estate needs!”J & D – Sold on Echo Lake and bought on Lake Muskoka
Jim did me a favor 20 years ago and I wanted to return the favor – I approached him and Iris at the cottage show and, even though I already had a real estate agent, he recommended a cottage property that I purchased and enjoyed for those 20 years. I therefore, tracked him down and had him be our agent in selling that property. Our priority was to find new owners that would be friendly and fit in well with the neighbors and Jim and Iris found the perfect couple Jim and Iris made the entire sale most enjoyable. The experience was so smooth and enjoyable that the sellers, the buyers and the real estate agents all got together for supper the following summer at our old cottage!K & L – Lake Muskoka
It is with great pleasure and appreciation for me to recommend the services of Jim Gardiner and the entire Gardiner Team. Jim’s awareness of community by-laws and market related activities extracted incremental value for us when we were finalizing the purchasing agreement.JB – Mirror Lake
Just want to tell you that you did a fine job for me on the cottage sale on Lake Muskoka. The sale has removed a huge load from my shoulders. Iris, just a note to thank you again. Money is in the bank!!!!!!BJ – Lake Muskoka