Real Estate Market Update | Muskoka January- December 2018

Cottages in Muskoka

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

 

 

Real Estate Market Update | Muskoka, January-September 2018

OCTOBER 31, 2018

As the third quarter of 2018 came to an end, it remained unclear if a shift was taking place in the broader Muskoka and area marketplace. Generally, we see declines in the number of waterfront, recreational properties sold, concurrently with a strengthening of average sale prices, except for some isolated markets. At the same time inventory levels have increased in some regions, a shift from the previous three years which witnessed sharp declines.

 

In the broader market, year-to-date 1,126 recreational properties were reported sold in Bracebridge, Gravenhurst, Huntsville, Lake of Bays and the Muskoka Lakes. Last year 1,140 properties were reported sold over the same period, a mere decline of just over 1 percent.

 

Notwithstanding the foregoing not all markets and regions are performing similarly, as is demonstrated by an analysis of the market activity on Muskoka’s big lakes.

 

Lake Muskoka and Lake Joseph saw fewer listings come to market during 2018 than the same period in 2017. Last year 819 properties came to market during the first 9 months of the year on Muskoka’s big lakes. This year that number declined to 733, approximately 10 percent fewer listings than to September 2017. Not only did listings decline, but sales on the big lakes also drifted downward in 2018. There were 28 waterfront sales reported on Lake Joseph during the first 9 months of 2018. Last year there were 31. This year 27 waterfront properties were reported sold on Lake Rosseau, a slight drop from 31 sales that took place last year. In the case of Lake Muskoka, the decline was more significant. Reported sales decreased by more than 21 percent, from 156 to 123 properties.

 

Significantly the largest declines in reported sales on the big lakes were properties having a sale price of $3 Million or more. In 2017 there were 41 waterfront properties reported sold having a sale price of $3 Million or more. This year (as of the end of September) only 19 were reported sold in this category, a decline of more than 50 percent. Explanations for these declines vary: lack of good inventory, increasing cost of money, and longer-term concerns related to Canada’s financial stability. The recent turmoil in the world’s equity markets is likely to further aggravate this market price point.

 

It is not surprising that the average sale price for properties representing sales over $500,000 on Muskoka’s big lakes has declined year-over-year. Last year the average sale price for all properties sold in this category came in at $2,189,793. This year that number has dropped to $2,101,323. Clearly more properties with lower price points were selling than higher priced recreational properties. This represents a decline of approximately 5 percent. Days on market for properties in this category increased marginally.

 

In the broader markets listing inventories are increasing, particularly in the lower price points, although no distinct pattern is evident that allows for market-wide conclusions or patterns. For example, in the Muskoka Lakes region, new listings increased in all price categories, particularly properties with a list price of less than $1 Million. Conversely, in the Huntsville-Lake of Bays region, new listings declined by more than 20 percent, with a 30 percent corresponding decline in sales. It would appear that a market inflection is occurring, but there is insufficient data to accurately explain or define what is happening.

 

Chestnut Park and its sales representatives continue to dominate the Port Carling office marketplace. Chestnut Park’s dollar volume sales exceeded the closest competitive office by more than 37 percent. Year-to-date Chestnut Park’s sales representatives have completed more than $251 Million in recreational property sales, only slightly off the record high sales of 2017, and were responsible for the sale of 3 properties having a sale price that exceeded $10 Million.

 

Urban markets have undergone pronounced changes in 2018. This is due primarily to the disappearance of cheap and easy money. There have been five interest rate hikes and now lending institutions are stress testing conventional borrowers. It would appear that this is the new normal and that for the foreseeable future we can anticipate rising interest rates and the continued disappearance of easy money. The natural consequence of these factors is stable and even lower sale prices. In Toronto and area, we have seen a moderation in sales and average sale prices as the cost of money has made exuberant buying prohibitive. There is little doubt that this will influence the recreational market, particularly if inventory levels continue to increase across the entire recreational marketplace. Due to the seasonal nature of the Muskoka and area recreational marketplace, the impact of these broader economic changes will not become apparent until the Spring of next year.

 

Prepared by:

Chris Kapches, LLB, President and CEO, Broker

Waterfront sales “Best year-to-date”

Sales of waterfront properties recorded through the MLS® system of Muskoka Haliburton Orillia – The Lakelands Association of REALTORS®, declined by 14 per cent in October 2016, albeit from a record last October.

On a year-to-date basis waterfront sales were still up 11.8 per cent from the first nine months of 2015. This was the best first 10 months to any year on record.

 

“While waterfront property sales took a step down from last October they are still very strong, with much of that year-over-year decline simply reflecting the white hot pace of sales at this time last year when there were still many more properties for sale on the market,” said Mike Taylor, President of Muskoka Haliburton Orillia – The Lakelands Association of REALTORS®. “Having said all that, the bigger picture is that 2016 will, in all likelihood, be the best year ever for sales in the Lakelands region.”

The median price for residential non-waterfront property sales was $250,000 in October 2016, up 9.6 per cent from October 2015. On a year-to-date basis the median price was running at $255,000, up 8.5 per cent from the first 10 months of 2015.

The median price for waterfront sales in October 2016 showed an increase of 13 per cent from October 2015. On a year-to-date basis the median price for waterfront property sales was up 9.5 per cent from the first 10 months of 2015.

The total value of waterfront sales was $101 million, an increase of 16.8 per cent from October of last year. This was the highest level for October on record and marked the first time volumes had ever surpassed $100 million in this month.

Includes transactions in all areas recorded by Muskoka Haliburton Orillia – The Lakelands Association of REALTORS®

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Important information The area served by the more than 680 REALTORS® who belong to Muskoka Haliburton Orillia – The Lakelands Association of REALTORS® serving Muskoka, Haliburton and Orillia, is located less than a two-hour drive north of Toronto, in the heart of Canada’s Cottage Country. There are several major geographical areas within the Association’s boundaries, including the City of Orillia, Gravenhurst, Bracebridge, Muskoka Lakes, Huntsville, Almaguin Highlands, Lake of Bays and Haliburton. Each of these areas has a unique blend of properties ranging from residential homes in the City of Orillia and smaller towns to the rural areas in-between, as well as a mix of waterfront homes/cottages on the many rivers and lakes throughout our regions that range from the smaller entry level properties to the prestigious.