Price drop expected for Canadian cottages: report

Price drop expected for Canadian cottages: report

The average cost of a cottage in Manitoba is expected to decrease three per cent in 2023, according to a recent Royal LePage recreational property report.

The report forecasts a 4.5 per cent drop nationally, stating a reduced demand as a result of economic uncertainty and a lack of available housing stock, has helped to keep prices stable.

Rolf Hitzer, a broker with Royal LePage in Lac du Bonnet, watched the remarkable impact the COVID-19 pandemic had on Manitoba’s cottage market.

He recalls a depressed market in the province leading up to the global pandemic, owing to the United States’ financial market crash in 2008. Many prospective buyers migrated south for cheaper properties in Nevada, Arizona and Florida. Then came COVID, which Hitzer called a game changer, as there was bidding on cottage properties that hadn’t happened in over a decade.

“The fear factor of, ‘I don’t want to travel because it’s unsafe, I don’t feel safe owning real estate (in the U.S.).’ And the low interest rates (made) buying recreation property even more affordable in our province, and then the, ‘Hey, is this somewhere I can go and live and work from, because I can now work remote?’ Hitzer said.

In Lac du Bonnet, the cost of an average single-family property on a backlot rose to $350,000 in 2022, a whopping 19.5 per cent jump from 2021. Single-family waterfront homes swelled to $550,000 on average in 2022, a 10 per cent increase from the previous year.

“So all of these variables changed our cottage market, where there was heightened interest, shortage of inventory, prices were escalating, bidding starting happening, and now here we are today post-COVID and all kind of wondering what’s really going to happen because we really don’t know.”

Hitzer said logic would point to Manitoba remaining a steady market, given the economy, low interest rates and many buyers now having the luxury of working remotely.

“And, the final one is we’re still affordable even though the prices have gone up and it feels really high. When you compare us to the rest of Canada, especially when it comes to waterfront properties, we’re a bargain.”

Indeed, Manitoba remains the most affordable place in the country to enjoy cottage country. After 2022 saw the average single-family home in the Prairies go for $271,300 ($8,600 below the next closest region), 2023 is forecast to drop to $263,161, according to Royal LePage’s report. That’s $8,342 below the next closest region and nearly $329,000 cheaper than the national average ($592,005).

The most expensive region to buy a property remains Alberta (forecast $1,171,328 for a single-family property in 2023). Oil country is also the only province that is forecast to increase again this year (0.5 per cent).

Hitzer argued many prospective buyers still don’t feel safe living in the U.S., which he said bodes well for Manitoba’s market.

“These things I think are going to continue the cottage market to have a good market. When I say good, (I mean) balanced or seller’s market, depending on inventory levels,” he said.

“I really feel our cottage market will have an equity gain anywhere from one to five per cent.”

The recreational property forecast revealed 56 per cent of recreational property experts in the Prairies reported less inventory this year compared to last year, while more than three quarters (78 per cent) of respondents said that demand levels are comparable to last year.

That’s the story Shanna Karle knows. Karle, a broker with Ateah Realty that specializes in real estate services for the beach communities on the east side of Lake Winnipeg, said a depleted inventory continues to be the main topic of conversation, but that prices in the area have remained steady.

“We are still very low on supply, so we are not experiencing the kind of price drops and catastrophic stuff that has been experienced in a lot of other markets,” Karle said.

“My personal prediction is that if we experience the price drops, that it’s going to happen organically toward the end of the season. Even that, right now, is looking like a big if.”

Karle said when the rest of the country was seeing price drops in October (end of cottage season), her region hit the pause button. It’s a common theme on the east side of Lake Winnipeg, as the market tends to pick up where it left off in Spring. That holds the value of properties in the area high while inventory continues to be scarce.

“So when we price them for the upcoming season, we’re basing it on solid values, which we hit pause on in October. I’m finding that, so far, I’m not having any problem selling them at those prices,” she said.

“It’s listing season. So as we’re listing, if there’s not a ton of people buying those listings and the inventory starts to pile up, the cream will rise to the top. Those properties that are nicer for the price range will be snatched up relatively quickly, and the ones that maybe aren’t as nice, in the same price range, may sit a little longer.”

The report by Royal LePage also noted 44 per cent of recreational property experts in the Prairies said that they have witnessed a significant increase in buyers who intend to use their recreational properties for rental purposes. Hitzer said a popular line of thought has become for people to use their cottage during a specific time of year, then rent it out the rest of the year, which will pay for their property taxes, renovations and some utilities.

He argued it’s an effect that was brought on by Airbnb, the online marketplace for short-term homestays.

“Air B&B has changed out mindset in terms of rental properties. In the past, there was no air B&B, there was no short-term, ‘Hey, I’ll rent for just a weekend and pay two, three, four-hundred dollars a night. In the past, it would be, ‘I’m going to rent it out for one week per year.’ Those days are long gone.

“So, when you have a financial opportunity that’s been created by a property that I already own — and in the past it cost me money to keep, whereas now I’m actually making money by keeping it — why would I sell it? Some of that is influencing shortages of inventory.”

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