Possibilities could be there for buyers ready to swoop, says CEO
High interest rates and surging borrowing costs helped cool housing market activity across Canada in 2023 – and Ontario’s cottage country was no different, with demand tumbling from the 2020/21 highs of the COVID-19 pandemic boom.
December saw residential non-waterfront sales in Ontario’s Lakelands region slide by 12.4% from the same month in 2022, according to the Lakelands Association of Realtors, with overall non-waterfront sales for the whole year plunging by 8.8%.
Waterfront sales, meanwhile, posted a 3.6% decline on an annual basis in 2023 compared with the previous year – although that still registered 45.9% below the five-year average and 47% below the 10-year average for the month of December.
Bonnie Looby, president of the regional realtors’ association, said those overall home sales figures, the lowest for more than 25 years, arrived “after higher interest rates pushed many buyers to the sidelines amid affordability reassessments and uncertainty on future rate movements.”
With prices having slipped throughout last year, 2024 will present an “opportunity” for interested buyers to snap up a home in cottage country – although it remains largely a personal choice depending on the individual circumstances of each borrower, according to a prominent mortgage broker.
Drew Donaldson (pictured top), founder and CEO of Donaldson Capital, which operates a satellite office in Muskoka, told Canadian Mortgage Professional that his team had seen examples in recent months of buyers capitalizing on the slower market to secure a deal in the region.
“We’ve actually had some of our clients scoop up some market deals and things that didn’t sell in the early fall and were taken off the market,” he said. “We saw some of our clients go back and [agree] those deals privately once they’re not listed.
“So I think opportunities will present themselves in the cottage space. That’s really a personal decision, though. If somebody’s personally ready and financially able to buy a cottage, I think 2024 is going to be a good year to do it.”
BMO chief economist Doug Porter said that the Bank of Canada’s rate increases throughout 2022 and 2023 would probably continue to stymy chances of a significant economic upswing.
— Canadian Mortgage Professional Magazine (@CMPmagazine) January 9, 2024
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When could buying a cottage in 2024 make sense?
It goes without saying that carrying costs for the purchase will be much higher than during the boom years of 2020 and 2021, when slashed interest rates gave scores of borrowers access to cheap credit. Still, the fact that prices have dropped in recent months may also suit particular buyers, according to Donaldson.
“Again, it’s a personal decision,” he said. “It’s not like an investor saying, ‘Hey, the market is going up 10%. Let’s go buy a rental property.’ It’s really kind of irrelevant. If you’re going to buy a cottage, I always say to buy based on the long term, so you’re going to hold it for 10-20 years.
“And if you do so, I think 2024 is a good market where rates are coming down slightly, and you can maybe even negotiate the price a little bit more than you used to in the past and go find that cottage compound that you’ve been looking for.”
More balanced market good news for interested buyers
During the pandemic, bidding wars and properties selling for tens of thousands of dollars over asking price were fixtures of the cottage market, resulting in a feverish and highly competitive environment that squeezed out many prospective buyers.
A more balanced market in 2024 is better news for those who are in a position to bid for a cottage property, Donaldson said, because it presents more leeway for negotiation and a good deal instead of bloated prices and a series of competing offers.
“We all know when rates were at rock bottom and the economy was booming, as much as that’s healthy from the real estate and mortgage perspective, it’s terrible for buyers,” he said. “Because there’s so many people bidding on so few properties, it’s never fun.
“So when the market’s actually a little bit subdued and the confidence is kind of shaken, that’s a good time to go out and find a cottage that fits what you’re looking for because there won’t be as much competition.”
That’s not to say buyers are likely to flock to the cottage market in 2024, he added – but it puts those individuals who have prioritized a cottage purchase this year in a good position.
“I’m not saying I want you to just go buy cottages on a whim. I just think if you’re financially ready, 2024 could be a good year where you actually survey the market,” he said. “You buy something [for] a little bit less and as interest rates come down, these people aren’t paying the same amount of interest costs as they were last year.”
