The Bank of Canada’s first rate cut in four years hasn’t boosted demand for real estate in southern Ontario’s cottage country, experts say, though there are signs that the vacation property market may soon begin recovering from a prolonged post-pandemic downturn.
“It really hasn’t improved things yet — it’s just not enough,” Bonnie Looby, president of the Lakelands Association of Realtors, said of the BoC’s June 5 move to cut the overnight rate by 25 basis points, bringing it to 4.75 per cent. There has since been one more rate cut of 25 basis points, announced on Wednesday.
“I didn’t see any reaction at all,” Shawn Woof, senior vice-president at Sotheby’s International Realty who specializes in cottage country waterfront properties in Muskoka, Georgian Bay, and Muskoka Lakes, said of the response since the first rate cut.
During the pandemic, cottage country real estate soared as Ontarians looked to get out of the city and access private outdoor space during a time of lockdowns and flight restrictions. But, since then, the market has undergone a correction and stagnated.
Through the first six months of this year, prices of waterfront and non-waterfront properties were roughly flat from the same period in 2023, according to Lakelands. Meanwhile, the median price of a non-waterfront property was $667,180, down 2.6 per cent on a year-over-year basis, and the median price of a waterfront property hit $970,000, inching upwards just 2.1 per cent.
Multiple factors continue to hold cottage country real estate back from a resurgence, with high interest rates only part of the story.
For one, many sellers have been stubborn on pricing despite pandemic-related demand disappearing. “It’s really hard to get through to people that we are not in COVID times anymore,” Looby said.
Another factor is a wave of new short-term rental restrictions hitting cottage country. “We’re seeing municipalities, in various parts of the process, starting to implement restrictions or regulations on short-term rentals,” noted Woof. These limits are another hit to demand, since many cottage buyers choose to rent out cottages part-time to help cover ownership costs.
However, both Woof and Looby suggest there are early signs of conditions that could lead to a turnaround. “Nobody has a crystal ball here, but I actually think that we may be somewhat close — if not there — to the bottom of the market,” Woof said.
Active listings are far outpacing sales, he noted. For example, this June in Muskoka, there were 417 listings on the market compared to just 55 sales. In the short-term, this puts buyers in the driver’s seat. “Because there’s so many active listings versus sales, they’re able to now negotiate a better price — and they’re able to put the conditions in there to make sure that they know completely what they’re buying,” Woof explained.
Sooner or later, though, news of such favourable buying conditions tends to encourage more people to dip back into the market. And when that happens, multiple offers on properties can begin driving prices upward.
Some sellers are also beginning to list their cottages at more realistic price points, said Looby, and these properties are moving. She estimates prices are down about 10 per cent from a year ago.
“Prices have probably settled back to a more logical location,” she said.
Woof agreed: “We’re seeing a lot of price reductions — I see them daily.”
Though the worst could be in the past for the market, neither Looby nor Woof expect a rapid ascent in prices or sales, even with the recently announced second rate cut and more on the horizon. “By the fall, we might see a better outlook. It’s hard to say,” Looby said.
Woof is also measured in his prediction: “I think there could be a slight uptick — but I don’t see this being a major swing.”
