Spring is officially underway in Canada, and for some it may mean deciding whether this could be the year to buy a cottage or cabin.
But a new report from Royal LePage says people may need to budget properly before that purchase.
The report, released Wednesday, found the recreational real estate market could be in line for a revival with the national median house price forecast to increase by about five per cent.
Royal LePage president and CEO Phil Soper said demand has been building amid inflation.
“There’s no place we see across the country that doesn’t have growing demand and therefore some upward pressure on prices,” Soper said.
Inflation is dropping, decreasing overall to 2.8 per cent in February, surprising economists and bringing the possibility that both the housing market and recreational homes could see a boost.
In 2020, a Royal LePage report found the prices of recreational homes rose about 11.5 per cent to about $453,046 in the first nine months of that year, in part due to dwindling supply due to increase demand.
Almost four years later, the market appears to be in a similar situation.
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A survey of 150 Royal LePage recreational real estate professionals earlier this year found 41 per cent reporting less inventory compared to the same time in 2023. However, 64 per cent noted they were having similar or even more demand.
“As the economy has revived, and in particular, as people have felt more certainty about economic conditions going forward and the end of the … very high interest rate environment coming to an end, there is more confidence in recreational markets,” Soper said.
Low inventory with high demand could prompt a rise in prices, the report notes, with Atlantic Canada, B.C. and Ontario likely to see the biggest jumps of 4.5, five and eight per cent, respectively.
Federation of Ontario Cottagers’ Association executive director Terry Rees told Global News he’d be surprised if a big rebound in pricing is seen, though there would be “pockets” that see a jump in price.
“I think buyers are being cautious, and I think expectations from sellers have been tempered significantly,” he said. “Even with the prices that have come off, we still have to consider what that is going to mean for your household budgets.”
Last year, a report by ReMAX Canada found while demand remained, first-time cottage buyers “stepped to the sidelines” as owners looked to keep their vacation homes in the family. The company even found 69 per cent of Canadians were hesitant to invest in a cottage due to economic uncertainty.
The Royal LePage report suggests buying activity could intensify if interest rates drop.
“Cash plays a much larger role in secondary properties and vacation properties than it does in primary properties,” he said. “The main reason being are financial institutions just won’t take the same risk on a secondary property.“
Rees said that while a rate drop could still be far off, it could put pressure on prices further but people need to consider what that could mean for their budget, especially when it’s not involving their primary home.
“When people are making a purchasing decision, it’s a combination of the purchase price and what your monthly bill is going to be or your monthly payment,” he said.
— with files from Global News’ Saba Aziz and Craig Lord
© 2024 Global News, a division of Corus Entertainment Inc.
