Cottage market cools down after 2020 COVID boom

After reaching record high sales prices at the height of the pandemic, the cottage market in Ontario has mostly softened into balanced territory, making it a better time for buyers — as long as higher interest rates, fuel costs and food costs aren’t a concern.

In Peterborough and the Kawarthas, the average cottage sale price dropped from about $1.24 million in the first quarter of 2022 to about $856,000 in the first quarter of 2023, according to ReMax’s 2023 cottage trends report issued in April.

The number of sales in that area also dropped by nearly half, from 62 in the first quarter of 2021 to 32 in the same quarter in 2022.

Closer to Ottawa, in the Rideau Lakes area, average cottage sale prices took a more modest dip of about five per cent, from about $990,000 in Q1 of 2022 to about $940,000 in Q1 of 2023. Sales remained steady.

Back in the summer and fall of 2020, bidding wars for cottages in and around Ottawa were resulting in final sales of about 50 to 70 per cent over asking prices, according to local realtors.

Here’s more of the data for cottage country west of Ottawa:

Slowdown expected after COVID-19 boom in demand

The dip isn’t unexpected.

The market for recreational properties is “hypercyclical,” according to Ben Rabidoux, founder of the market research firm North Cove Advisors. It tends to rise much more sharply than in cities when conditions are good, but also drop much more sharply when conditions are bad.

That’s because cottages are discretionary and unnecessary. They’re the first things people will put off buying if conditions aren’t right, and the first properties people will sell to generate income when needed.

Rabidoux said recreational areas around Gatineau, Que., as well as Muskoka and the Bruce Peninsula, saw incredible gains in prices from 2020 to early 2022 — almost double in some spots.

And while it’s hard to sort out how many of those properties were cottages, Rabidoux said, “I would suggest [the gain] was overwhelmingly driven by recreational properties,” he added.

High interest rates cool market down

Now, high interest rates — 4.75 per cent as of June 2023 — are cooling things down.

Greg Ball, owner and broker of Ball Real Estate Inc. in Peterborough, told CBC Radio’s Ontario Morning that higher interest rates have likely had the biggest effect on the market, but that other factors contribute, too.

“Fuel costs have gone up substantially, food costs have increased, coupled with interest rates,” Ball said. That makes it hard for some families to defend driving or flying to cottage destinations.

Some of the listings going up for cottages in the Peterborough area include people who bought during the pandemic and are being dragged back to their jobs, or who have realized that cottages require a lot of work, Ball said.

That’s helped create a bit more supply than there had been in the past, but overall the area is “still significantly undersupplied” for cottages, Ball said.

There were 100 listings in the area in the first quarter of 2023, compared to 82 in the same quarter in 2022, according to ReMax’s cottage trends data.