Canada’s summer cottage market is showing no signs of cooling off as it rebounds from a long winter and late spring, national realtor group Re/Max said Wednesday.
Sales in Ontario and Atlantic Canada were up in May after a sluggish April and Re/Max is forecasting mid to high single-digit price increase for cottages, cabins, vacation condos and camps throughout the rest of the year.
“What we’re seeing is a healthy and stable real estate market supported by strong economic fundamentals that we believe are going to continue moving forward, at least in the foreseeable future,” said Gurinder Sandhu, director for the Atlantic Ontario region.
An eventual increase in interest rates could modestly dampen sales, but he said there are no expectations of dramatic hikes that would threaten what Sandhu called a “healthy and balanced” market.
In its recreational property report released Wednesday, Re/Max said Canada’s strong residential real estate market in urban centres has had a spillover effect on recreational property sales with homeowners using equity gains in their homes to buy a second property.
That has been happening mostly for markets within a two-hour drive of Canada’s large urban centres like Toronto, Calgary and Vancouver.
Young families, along with near and recent retirees, are driving the majority of recreational property sales across the country.
Re/Max also said buyers are purchasing properties from where they can work throughout the summer and use year round as they seek to avoid road congestion by taking advantage of technology to telecommute.
While some potential buyers may have been discouraged by the Canada Mortgage and Housing Corporation’s recent decision to eliminate insurance on second mortgages, there has been little to no impact on sales from the change, it said.
Re/Max also said a weaker Canadian dollar has prompted buyers to remain in Canada rather than buying south of the border.
Sandhu said the report of 41 regions across Canada, excluding Quebec, was derived from conversations with its agents and statistical analyses from local real estate boards.
“There has been that bounce back in the warmer months and what we believe we’re going to see toward the balance of the year is really a market that’s on par with last year and a modest increase in prices,” he said from Toronto.
Re/Max’s real estate outlook is stronger than some other forecasts. CMHC predicts the average home price will rise 3.5 per cent to $396,000 on a seasonally adjusted basis this year, and 1.6 per cent to $402,200 in 2015.
David Madani of Capital Economics, who believes Canada’s housing market is poised for a major correction, said summer cottages are vulnerable to a housing downturn.
“When that market turns and heads down that’s probably the first thing that people are going to chop and want to sell,” he said in an interview.
Madani said buyers who are concerned about rising interest rates “would only tighten the screws that much further in terms of the outlook for the cottage industry.”
Prices vary widely according to location. Entry-level waterfront properties north of Toronto start at $300,000 to $400,000. But a 630-square-metre (7,000 square foot) cottage overlooking Lake Rousseau in the Muskoka region sold for $7.4 million, the most in more than six years.
According to the Canadian Real Estate Association, the number of Muskoka area cottage properties sold in May fell four per cent from the prior year. However, the median price rose seven per cent to $494,000, the second-highest level on record. The total value of cottage sales increased 30 per cent to a record $181.5 million.
The three hottest areas of the country for summer properties are Collingwood and Lake Simcoe, both north of Toronto, and parts of British Columbia, Sandhu said.
In Western Canada, high consumer confidence is motivating buyers, with some markets reporting the most activity since the recession.
The Okanagan Valley is attracting buyers from Alberta with new direct flights from Fort McMurray. The average waterfront home now sells for about $590,000, compared with $900,000 in 2007 prior to the 2008 recession.
And in Tofino, on the west coast of Vancouver Island, the most expensive sale was an ocean front property for $7.9 million.
The Whistler market is picking up after sustaining a slump following the Vancouver 2010 Olympics. Condos near Whistler Village are the most popular among buyers, but a 630-square-metre home sold for $10 million, the highest price tag since 2008.
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Note to readers: This is a corrected story: A previous version incorrectly spelled ‘Re/Max’