Prepared by: Chris Kapches, LLB, President and CEO, Broker
With little variation, the various regions in the Muskoka and Region recreational and waterfront marketplace have responded similarly to the economic impacts that have altered the entire real estate landscape in 2022.
Inflation, and the Bank of Canada’s reaction to it, are the principal reasons for this incredible and rapid change. In a word, the impact on the market has been negative.
Over the course of 2022, particularly after March, when the Bank of Canada began increasing its benchmark rate from 0.25 to 3.25 percent, the recreational and waterfront marketplace can be characterized by declining sales, while properties spend longer on the
market before being sold. The chart below vividly describes what has happened across the entire region year-to-date. It should be emphasized that the data in the chart is not an even reflection of the marketplace. There were exceptional gains in sales and sale prices during the first three months of the year. Since then, the declines have been quite pronounced.
Three aspects of the data need to be highlighted: new listings, sales to list price, and days on market. The number of new listings coming to market has declined as the year has moved through the third quarter. Clearly, sellers of recreational properties, primarily because of
their inherently discretionary nature, are not putting their properties on the market during this negative period. The sales-to-list ratio at 100.7 percent reflects the prices achieved during the first quarter of 2022 when demand outstripped supply and multiple offer competitions were common. In September, 87 waterfront properties were reported sold with an average sale price of $1,436,754, but at a 95.9 percent sales-to-list price ratio. This reflects list price negotiations. Prices, however continue to hold steady. Lastly, the 14 days on market shown in the chart are also a reflection of the market before rising rates. In September, it took all recreational and waterfront properties 27 days to sell. This is reminiscent of the length of time it took
properties to sell before the Covid-19 pandemic.
The Bracebridge, Gravenhurst, Haliburton Highlands, Huntsville, and Lake of Bays waterfront marketplaces have individually been impacted in a manner similar to the overall marketplace. Except for the Gravenhurst waterfront market, sales have declined by 42 to 53 percent. The Gravenhurst waterfront marketplace has shown a little more resilience. On a year-to-date basis
sales have only declined by 23 percent compared to 2021.
Generally, average sale prices have remained strong in these marketplaces, averaging a year-over-year increase of between 12 and 20 percent compared to 2021. Waterfront prices in the Lake of Bays and Gravenhurst regions have not been as resilient, increasing slightly over 1 percent compared to last year.
The Muskoka Lakes region remains the priciest, with the average sale price of all waterfront properties sold coming in at $2,460,992 on a year-to-date basis, an amazing 29 percent higher than for the same period in 2021. The average price achieved on Muskoka’s three
Big Lakes, Lakes Rosseau, Joseph, and Muskoka is substantially higher. In other respects, the Muskoka Lakes market has responded similarly to the economic shock of rising interest rates and inflation as the entire region.
MUSKOKA LAKES
The sales activity on Muskoka’s three Big Lakes is eye-popping. Overall the number of sales declined by a little over 27 percent, from 113 to 82 reported sales.
Interestingly over the same period, the number of sales in the $5 Million plus range remained unchanged. This could support the theory that at the very high end of the market price point, buyers are not interest rate sensitive, but that appears to be the only price point where that is the case. In 2022, the average sale price for all properties sold on Lake Rosseau, Joseph, and Muskoka plateaued after consistently rising since 2018. In 2018, the average sale price for all waterfront properties sold came in at approximately $2.3 Million.
During 2022 it has levelled off at approximately $3.75 Million. Even though the total number of sales has declined, consistent with the overall marketplace, price stability on Muskoka’s Big Lakes has remained strong.
CHESTNUT PARK’S PERFORMANCE
Chestnut Park’s market penetration and share has become dramatically evident during the downturn in the recreational and waterfront market. Year-to-date Chestnut Park’s sales representatives have been responsible for more than $345 Million in property sales. In the
Muskoka region, Chestnut Park sales representatives have achieved 80 percent more sales in dollar volume than the next closest brokerage office in Port Carling.
SUMMARY
The last quarter of any year, excluding the pandemic years of 2020 and 2021, is always slow for waterfront and recreational property sales. This year will be no exception. In fact, compared to the last two years it will be exceedingly slow. Although the ultra high end of the market may not be interest rate sensitive, the rest of the market most definitely is. The Bank of Canada is expected to implement two further benchmark rate hikes in its crusade against inflation. Interest rates (5 year fixed) are currently in the range of 5.5 percent. In all likelihood by year-end they will be in the 6 percent range. As has already happened, these rising interest rates, coupled with the turmoil in the equity markets, will dampen buyers’ enthusiasm to make discretionary purchases. We can anticipate a continuation of the prevailing market conditions until the second quarter of next year when, hopefully, the Bank of Canada will be confident that inflation is under control.
This entry was posted on November 26, 2022 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!!!!!!
Lesley-Anne Goodfellow