Is it time to buy a cottage?

Thursday Mar 30th, 2023


After 2 years of double-digit price increases, it may be time to take advantage of potential deals on cottages this summer. Canada’s recreational real estate markets are anticipating slower levels of sales and price declines in 2023, after the spending spree that happened throughout the pandemic. Demand has also softened due to uncertainty in the economy and low inventory levels, according to Royal LePage 2023 Recreational Property Report.

During the pandemic, demand was so high that buyers continued to competitively bid on properties through-out the year, and so far this year, things have returned to a more normalized pattern of seasonal buying.

While the majority of recreational property buyers purchase for their own personal use, a small segment of recreational property owners use their properties as short-term rentals. Those purchasing for personal use tend to put more money down and borrow less, and as a result are less sensitive to the current interest rate environment.

Before you jump into the recreational real estate market as an investor, take careful consideration of some of the challenges that current owners are facing. Those who took advantage of historically low interest rates during the pandemic and were buying for investment purposes, were more likely to borrow, and with the increase in interest rates and lower bookings over the past year, these owners may be reconsidering cottage ownership. Increased costs for cleaning and maintenance services has also impacted cash flow.

Not only have bookings decreased, competition has increased with some owners entering the short term rental market to try to cover some of their increased costs when their properties are not being used for their own leisure. Those who are spending more conservatively because of inflationary levels and not booking travel, are also contributing to the lower level of short term rental bookings.

So as long as you have long term ownership plans, or are able to inject enough cash to reduce the cash flow pressure with seasonal short term rentals as an investor, this may be the year to take advantage of finding that little piece of heaven by a lake.

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