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Canadians love their cottages and chalets. According to a recent report by Scotiabank, the rate of second homeownership rose from seven per cent of Canadian households in 1999 to nine per cent in 2005. Up until the end of the housing boom last year the recreational property market was very active across the country.

While sales and prices dropped with the end of the boom, recent reports suggest that interest in recreational markets is already picking up. Lower prices combined with low interest rates have made properties more affordable, and in areas such as the Kawarthas in Ontario, sales are once again brisk.

The Scotiabank report raises an interesting question about the future of the recreational property market. It notes that the median age of Canadians who own second homes is 50, and that only one-quarter of vacation homes are owned by families with children – the rest are owned by empty nesters, singles and childless couples.

"Demand for second homes/vacation homes could slow over the coming decade as the large baby boom generation moves past its peak cottage buying years, and wealth gains fail to replicate the outsized increases of the past decade," says report author Adrienne Warren.

Re/Max says the demographic shift from baby boomers to Gen X purchasers has already begun. It says demand for recreational property from those born between 1965 and 1980 has increased from 40 per cent in 2008 to 74 per cent this year.

"After being priced out of most markets for the better part of the last decade, Gen X purchasers now have the financial wherewithal to buy recreational property at virtually every price point," says Michael Polzler, executive vice-president of Re/Max Ontario-Atlantic Canada. "Gen X is ideally positioned to pick up the slack in recreational property markets caused by softer demand from baby boomers and retirees. They represent the next wave of recreational property owners in Canada and they know it."

A Re/Max report says that although the supply of recreational properties is adequate in most areas, "heated activity in the lower-end has resulted in tight inventory levels for entry level products in 18 markets" in Ontario, North Saskatchewan and Salt Spring Island in B.C.

A Royal LePage survey found that 64 per cent of Canadians view cottage ownership as a sound investment. "To save money, a majority told us that if they owned a cottage, they would be happy to call it their new vacation destination," says Phil Soper, president of Royal LePage Real Estate Services. "It appears that many view owning a recreational property as the ultimate, no-hassle 'staycation' and one that presents an opportunity to invest while they enjoy."

The survey also found that 55 per cent of respondents say they would be willing to make financial or lifestyle compromises in order to get their vacation home. This includes purchasing a property with family or friends, renting out their cottage to help pay for expenses, buying a 'fixer-upper' and even moving to a smaller principal home in the city.

The Scotiabank report says that the majority of first and second homeowners in Canada are in the 45 to 64 age group. They represent 45 per cent of all homeowners, but 70 per cent of the increase in the number of recent homeowners.

Warren acknowledges that "anecdotal reports suggest that 'baby bust' households ... are already stepping up as the next wave of vacation home buyers. However, this cohort is far smaller than its baby boom predecessor."

She says while this could produce an easing in the steady upward pressure on cottage prices, "the available supply of listings is likely to remain fairly tight." That's because family properties are often passed down through generations of cottage owners, and land for development is hard to come by.

Re/Max says that while "low-ball" offers are increasing, they are not meeting with much success because sellers are in no hurry to make a deal. The sales-to-list ratio is still relatively high in most markets, says the company.

Some other recreational property trends:

Some American cottage owners in Canada are taking advantage of the stronger dollar to cash out of the market, says Re/Max. Older Canadians continue to look for secondary homes in the U.S. in Florida, Nevada, Arizona and California. But Scotiabank says that about 75 per cent of second homes owned by Canadians are located in Canada.

Re/Max says American purchasers have "largely fallen off the radar" except in a few locations.

When searching for a property, 68 per cent of Canadians want a lakefront location, says Royal LePage. The company says the three most important features of a recreational property are peace and quiet; access to electricity, sewers and plumbing; and four-season use.

"Notwithstanding the potential for a cyclical slowdown in home sales and price appreciation over the next few years, the longer-term trend toward real estate investing will likely remain an important component of household wealth accumulation and portfolio diversification," says Warren.

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