In my prior blog titled Forecast For Ontario Recreational Property Prices in 2023 Part 1, I reported that predictions had been made by one of Canada’s largest real estate franchise companies that recreational property prices across Canada overall will increase 4.5 in 2023. Closer to home it was stated that prices in Ontario would increase by 5.0% this year. Personally, after reviewing all the key numbers and posting my Monthly Market Report for real estate sales in the 1st Quarter of 2023 and as an owner of two waterfront properties myself, I am not in agreement with what some are forecasting.
As reported in my prior post, the outlook for recreational property prices in the Southern Georgina Bay area is calling for the following percentage increases in 2023.
- Recreational non-waterfront single family homes + 8.9%
- Waterfront single family homes +7.1%
- Recreational condominiums + 8.2%
For that past 12 months, MLS® dollar and unit sales activity along with median sale prices prices and the list-to-sale price ratio (the price Sellers are getting versus asking) have all been on the decline. Meanwhile, MLS® listings and days-on-market (the time it takes to sell) have been on the rise. Generally, more inventory is advantageous to Buyers versus Sellers as it provides Buyers with more choices from properties listed for sale and better leverage when it coms to negotiating a purchase price. Those two factors alone would suggest that property prices are less likely to rise.
In addition to the points raised above, with total 1st Quarter MLS® sales in our area down 53% in dollars and 45% in the number of properties sold, there would appear to be little to justify that recreational properties will go up by the percentages stated above. Particularly hard hit in our market are properties priced over $1 million with unit sales in those price segments down from just over 50% to a high of almost 75%, see chart below. Most waterfront properties in the area fall into the over $1 million categories.
Obviously, market conditions across of the Province will vary and here is a summary of what is predicted re: single family waterfront home prices in areas in and around Georgian Bay and Lake Huron:
- Bruce Peninsula – 2.8%
- Honey Harbour 31.3%
- Lake Huron/Huron County 20.1%
- North Channel .6%
As consumers we are well aware that inflation is upon us and further, the cost of borrowing including mortgage rates have gone up significantly in the past 12 to 18 months. While some recreational property Buyers may well have ready cash for their purchase, many do not. As I have said before purchasing a recreational property of any type is typically a discretionary purchase rather than a “must have.” With a market that has clearly shifted from what we experienced in 2020 and 2021 along with higher mortgage rates, many would-be recreational Buyers that I talk to are taking a “wait and see” attitude. Conversely, those that already own a recreational property are asking “is now a good time to sell?” With prices softening, some are contemplating selling now while others may be facing a mortgage renewal and at a significantly higher rate that what they are paying today. There are many reasons as to why some Sellers may be looking at sell.
As of this post the number of waterfront properties listed for sale on the local MLS® System around the bottom of Georgian Bay are up 115% from this time last year. By comparison, the total number of residential MLS residential listings overall are up 67% this year so the number of waterfront listings are clearly outpacing that. Looking separately at other areas, the number of waterfront property currently on the MLS® System located on the Bruce Peninsula are up 57% from a year ago while waterfront property listings on the far side of Georgian Bay in Tay and Tiny Townships along with Midland and Penetang are up 159% from one year ago,
One factor not considered in the forecast for rising waterfront property prices in the Georgian Bay area is the recent decline we have seen in the water level over the past couple of years. The picture below is the shoreline off Highway 26 across from Georgian Peaks Ski Club taken a week ago. Two years ago this flat shale rock shoreline was under water by well over 2 feet with waves lapping up into the trees.
My own cottage on Manitoulin Island is located in off Lake Huron so I am use to the fluctuating water levels which can be good or bad depending on your location. When the water level is low such as it is now you may gain more shoreline or beach which is a plus, For others, lower water may create a problem for boat access and docking especially if you have a fixed dock.
My dock is light weight aluminum with wood decking which is removed in the fall and re-installed in the spring. As such I have the flexibility of positioning it where needed from season to season. Those will a crib or permanently fixed dock are not so fortunate.
As the year progress I will provide further updates on the recreational property market and especially those that are on the water. Whether recreational properties attain the price appreciation that is forecasted in Ontario and particularly around Georgian Bay for 2023 remains to be seen. As a real estate Broker that followers the market statistics closely and as a waterfront property owner myself I have my doubts. With reduced sales activity, higher mortgage rates there is little to support 7% to 8% or more price increases.
Waterfront property ownership is the dream of many. I am glad I have mine and would be delighted to answer any questions you may have if buying or selling a waterfront home, cottage or other recreational property is in your future…..