While runaway home prices in the Greater Toronto Area may be frustrating the average house hunter, windfalls from soaring land values are helping sellers fund purchases of recreational properties nearby.
This is among the trends Royal LePage Canada, a real estate company that has several hundred franchises across the country, identified in its 2017 Canadian Recreational Housing Report, published this morning.
“Overall, in Ontario, demand remained highest for recreational properties within a two- to three-hour drive of the GTA, where high price appreciation has allowed many prospective purchasers to cash in on their home’s equity,” the annual report reads.
Royal LePage considers five types of properties to be “recreational”: lakefront, riverfront and oceanfront properties as well as cottages and cabins in the woods and resort-style condos.
Increased demand from an influx of equity-rich buyers has led to a supply crunch and, subsequently, higher property prices for vacation homes.
The aggregate price of an Ontario recreational property was $413,000 in May this year, up from last year, according to Royal LePage.
Royal LePage did not provide aggregate pricing for Ontario in 2016 for comparison because of a change in methodologies, a spokesperson tells BuzzBuzzNews.
The prices are based on observations from Royal LePage advisors in various regions, and largely reflect resale activity, although some markets, such as the Muskoka region, include new-construction numbers.
The most expensive submarket was the Muskoka region, where a lakefront property went for an average of $1.5 million in May, an increase from May 2016’s $790,000 average.
“Muskoka to Toronto is what the Hamptons is to New York, or Cape Cod is to Boston,” says Bob Clark, president of Royal LePage Lakes of Muskoka Realty — Clark Muskoka Realty, in a statement.
It’s not just downsizers buying weekend retreats who are driving up recreational-property prices in markets such as Muskoka.
Royal LePage Chief Operating Officer Kevin Somers tells BuzzBuzzNews homeowners who have already paid off their mortgages could use their equity to take out another mortgage while keeping their home, while others might simply relocate to cottage country in their golden years.
“A third trend would be people just literally cashing out of the GTA market from a principal residence point of view if they’re at or near what they perceive to be their historic retirement age or target and literally just moving to a recreational destination,” Somers explains.
GTA buyers shifting to a recreation-oriented region is a development Fred Losani, CEO of the Hamilton-based homebuilder Losani Homes, has also noticed while preparing for the launch of a new residential development in Ontario Wine Country.
Appearing on BuzzTV, BuzzBuzzNews’ weekly Facebook Live broadcast, Losani said early response to his company’s Beamsville townhouse and single-family home project called Vista Ridge has been especially strong.
“We’ve got more registrants that are waiting upon that site than we’ve had for any of our sites recently,” he said, noting a release date within the next 30 days.
“There’s a transference of wealth taking place,” he says, agreeing Baby Boomers are taking advantage of soaring GTA home prices.
“Everyone’s got to just get themselves out of the city sometimes and just simmer down,” Losani adds.
Some are willing to travel farther than others.
Francois Leger, who owns Royal LePage Humania in Sainte-Thérèse, Quebec, says Toronto buyers are getting drawn to the Mont-Tremblant and Charlevoix regions.
“The… regions saw an increase in buyers from Toronto, possibly a result of the staggering rise in property prices in Ontario that has cross well beyond the major centres,” he says in a statement.
Given a lakefront property in picturesque Charlevoix can be had for an average price of $177,000, it’s not hard to see why Toronto buyers are willing to shop in the neighbouring province.