Realtors say Ontario cottage sellers are still trying to cash in on pandemic-era prices, even though housing values have plummeted.Getty Images/iStockphoto
The Bank of Canada’s long anticipated interest rate cut this week will do little to lift Ontario’s struggling cottage market, as sellers and buyers remain widely in disagreement about the value of waterfront properties after their pandemic boom and bust.
Cottage real estate saw some of the biggest gains during the pandemic, followed by steep drops during the central bank’s rate-hike cycle that started in 2022. These markets, in regions like Muskoka and the Kawarthas, are often hit especially hard during periods of tightening monetary policy, as people prioritize their primary home in the city and look to sell their holiday home when interest rates rise and the cost of living becomes a strain on finances.
That situation has been exacerbated by the pandemic, when rates hit rock bottom and many people looked to purchase homes in cottage country, where they could experience the outdoors as pandemic restrictions made life in cities more difficult.
Today, realtors say sellers are still trying to cash in on pandemic-era prices, even though housing values have plummeted by as much as 31 per cent in 2023 in regions such as Peterborough and the Kawarthas.
Realtors say cottage communities across Ontario are still firmly in a buyer’s market, and it’ll take at least one more rate cut before those buyers will even consider coming off the sidelines. The inflated prices that many owners are listing their cottages at only make matters worse.
The situation has cast a shadow over cottage country real estate markets, says Steven Keshen, managing broker of Royal LePage Lakes of Muskoka Realty in Bracebridge, Ont.
“Real estate is psychological, and if you’re not feeling good about it, then you’re not doing anything about it, especially because cottages are very emotional,” said Mr. Keshen, who said one rate cut isn’t enough for buyers to feel like prices will stop sliding.
“This is an initial step and people want to see more consistency before they make any actual moves.”
Mr. Keshen added that there are many potential buyers who will be renewing mortgages on their primary homes in the next couple of years. Those buyers will want to see consistent rate cuts and know their mortgage payments aren’t going to skyrocket before they buy a cottage.
John Fincham, a real estate broker with Re/Max Parry Sound Muskoka Realty, said he expects the market won’t pick up until the Bank of Canada’s interest rate drops another 75 basis points to 4 per cent.
“We’re firmly in a buyer’s market and it’s not even close, and to flip that psychology around will take a jolt,” Mr. Fincham said.
“Every day there’s so many listings coming on the system and so few sales.”
Data provided by Mr. Fincham showed there were 2,938 active listing across Ontario’s cottage markets in May, 2024. That’s a 157-per-cent increase from May, 2021, when there were only 1,142 listings as buyers snapped up properties at a high rate.
The number of sales has also plummeted. In Muskoka, there were only 450 sales of homes under $3-million in May, 2024, compared with 1,217 in May, 2021.
“The few buyers that are out there are just biding their time,” Mr. Fincham said.
Mr. Keshen is cautiously optimistic that more rate cuts are on their way. If the Bank of Canada cuts rates for a second consecutive time in July, buyers could regain confidence that interest rates are truly on a downward trend.
“If we start seeing that trend, you’ll see more buyers that are ready to start looking again,” Mr. Keshen said.
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