The cost of vacation property in Canada is skyrocketing, with demand far outpacing supply, according to reports issued this week by the country's largest real estate companies.
A report by Royal LePage Real Estate Services says prices for waterfront cottages are up by 10.3 per cent compared to last year, to a national average of $199,922. Prices for a standard chalet and condominium unit are up by 9.3 per cent, to an average of $244,547.
In Ontario, the country's hottest vacation property market, a waterfront cottage costs an average of $349,483, up a whopping 17.4 per cent over last year. While waterfront properties in Quebec are cheaper, averaging $291,667, they have appreciated by 20.7 per cent.
"The waterfront is becoming an exclusive retreat for affluent purchasers," says Michael Polzler, executive vice-president, Re/Max Ontario Atlantic-Canada. "Purchasers of more modest means will have to compromise to realize their goal of ownership." He says that means some buyers will have to put up with longer drive times to get to their cottages, and settle for smaller lakes or channels. Other options, such as entering into a fractional ownership agreement, may also have to be considered, he says.
The Re/Max report says that "spurred by historically low interest rates, investment potential and family lifestyle, Canadians, Americans and Europeans are entering the market for recreational properties like never before." Of 49 markets surveyed by Re/Max, 83 per cent reported a "severe lack of inventory," the company says.
Across the country, the market is so hot that "in 2004, there will be seven Canadians in search of recreational properties for every two owners who plan on selling," says Phil Soper, president and CEO of Royal LePage.
The Royal LePage report includes a poll of cottage owner and buyer attitudes conducted by a market research firm. It found that 33 per cent of potential buyers said they were having a difficult time finding a cottage or recreational property, compared with 22 per cent who answered a similar poll in 2001. Only nine per cent of those looking for a cottage now said they were having a "very easy time" finding what they wanted.
Re/Max says that the cost and limited inventory of prime vacation properties is also putting upward pressure on less traditional recreational properties, such as rural residential markets. Those looking for recreational properties are now competing with local buyers and driving up the price of homes in rural communities.
Leased-land opportunities, where buyers are allowed to build a home on land that is leased for as long as 99 years, are also becoming more popular, says Re/Max. With waterfront properties in short supply, "many purchasers are buying property with little concern for the existing structure" on it, says Re/Max. "In many areas, land often outpaces the value of the existing cottage/home. As a result, seasonal properties are virtually disappearing from the landscape in some markets."
The impact of foreign buyers is being felt across the country. For example, in the ski area around Canmore, Alberta, where a standard chalet starts at $335,000, demand comes from as far away as Europe, with many buyers from England, says Royal LePage.
"The English have discovered that for the cost of a one-week vacation in the Swiss Alps, a two-week vacation in Canmore can be had. Direct flights from England to Calgary make the travel time virtually identical. Rental properties are always in high demand, so overseas owners never experience difficulty filling their home while away for months on end."
Re/Max says the areas of Banff/Canmore, B.C.'s Okanagan Valley, and properties in Atlantic Canada are of particular interest to American and European purchasers. "Given current property values in prime international recreational destinations such as Cape Cod, Nantucket, the Hamptons, Aspen, and Vail, many of these Canadian markets are undervalued," the company says.
The most affordable parts of the country, says Re/Max, still have some three-bedroom, winterized, waterfront properties starting at less than $150,000. These areas include St. John's, Trinity and Bonavista in Newfoundland; the Interlake Region of Manitoba; Pembroke, Kingston and Elliot Lake in Ontario; Summerside, PEI; and west of Edmonton in Alberta.