Retiring Baby Boomers and Gen-Xers drive the recreational property market
New speculation tax serves as a cold shower for would-be B.C. investors
According to a cross-Canada survey of Royal LePage’s recreational property specialists, the nation’s recreational market is primed for healthy single-digit growth in 2018, as buyers across the land flock to lakes and streams, and the seaside and mountain tops, with an eye towards retirement or a secondary home to raise children. Meanwhile, recreational property values in British Columbia are expected to dip slightly, as the new speculation tax on secondary residences impedes price growth and encourages Albertans, one of largest cohorts of recreational purchasers in the region, to adjust their search and find recreational homes elsewhere.
Looking ahead to the end of the summer market, the price of a recreational property in Canada is forecast to increase 5.8 per cent year-over-year to $467,764. When broken out, the majority of provinces are also forecast to witness strong price growth, with Ontario and Alberta leading the way, rising 10.4 per cent and 8.9 per cent year-over-year to $535,885 and $770,100, respectively. Only three regions are expected to witness recreational home values depreciate, with prices in Atlantic Canada and British Columbia forecast to decline by 7.5 per cent and 2.8 per cent to $228,754 and $531,333, respectively, while Manitoba dips but essentially remains flat with a 0.9 per cent decline to $230,833 over the same period.
“Driven by the strength of the nation’s economy, Canada’s recreational real estate market is set to experience another strong year,” said Phil Soper, president and CEO, Royal LePage. “While home values and sales activity in Canada’s largest urban markets have softened, demand for recreational properties remains robust in most regions. The search for that perfect summer getaway continues unabated.”
When asked, 42.0 per cent of recreational property specialists surveyed believed that sales activity would increase in their region by the end of the cottage season compared to the same period in 2017. However, the uptick in demand found within the regions will not directly translate into a decline in supply, with many respondents in every province, aside from Ontario, forecasting a rise in inventory when compared to 2017 (48.2 per cent).
This trend will be highly visible in British Columbia, where the new speculation tax, which aims to limit property purchases by those who primarily live outside of the province, will cause many existing homeowners to sell their secondary homes. As a result, prices within the region are predicted to decline slightly during the summer season, despite 40.0 per cent of recreational property specialists forecasting that sales would rise. This is due in part to a predicted rise in supply (47.5 per cent), as many secondary homeowners living abroad sell their properties to avoid the annual tax. Moreover, even though sales are predicted to increase, 55.0 per cent of respondents within the province believe that the policies will weaken momentum within the region and keep sales activity from reaching its true potential, while 40.0 per cent also stated that the new policies would impact prices.
“With Canada’s fastest growing economy, British Columbia’s vast and varied recreational regions might be expected to lead the country,” continued Soper. “That will not be the case in the near-term as new taxes aimed specifically at recreational property owners are expected to weaken markets across the province, driving would-be purchasers to invest elsewhere. While these policies were billed as a move to impede speculation and foreign investment, international purchasers make up a very small portion of the recreational market, and the dreaded ‘house flippers’ are an urban phenomenon.”
Albertans, who are one of the largest and most tenured cohorts of buyers in British Columbia’s recreational property market, are expected to increasingly look to their own province for secondary vacation properties, driving prices higher in popular regions like Canmore, and west of Calgary in the Rocky Mountains.
Meanwhile, with a forecast aggregate price of $290,271, Quebec’s recreational market is expected to witness healthy growth, as the province’s robust economy draws many purchasers from major city centres into more rural regions. According to the survey, 43.8 per cent of respondents in Quebec believe that the number of buyers looking to acquire a recreational property as their first home will increase this year when compared to last.
“We believe strongly in the future of Quebec’s recreational property market,” added Soper. “With an expanding economy providing more disposable family income, we expect regions like Mont-Tremblant to enjoy strong chalet sales volumes and appreciating property values.”
Nationally, 73.5 per cent of recreational property specialists surveyed stated that foreign ownership accounts for less than 5.0 per cent of the recreational market. When broken out by region, the highest agreement came from British Columbia, Alberta, Saskatchewan and Manitoba, with over 80.0 per cent of respondents in each market stating that international purchases make up less than 5.0 per cent of sales (80.0 per cent, 81.3 per cent, 88.9 per cent and 85.7 per cent, respectively). The lowest agreement found within the country came from Atlantic Canada, where 40.0 per cent of respondents believed that international purchases accounted for less than 5.0 per cent of the total market, while a further 40.0 per cent believed that it was in the range of 5.0 to 10.0 per cent.
According to the survey, 59.0 per cent of respondents stated that Generation Xers (36 to 51 years old) are the preeminent purchasers of recreational properties in Canada. These purchasers will typically search for property less than two hours away from their primary residence (67.5 per cent) for its associated lifestyle (84.5 per cent) or as a potential retirement home (49.5 per cent). When looking to sell, respondents largely agreed that most secondary homeowners claimed that they were getting older (80.0 per cent), couldn’t keep up with the maintenance of the property (48.5 per cent) and that the home was ultimately going unused (67.5 per cent). However, despite this, over two-thirds of respondents (68.5 per cent) have witnessed a growing trend in Baby Boomers and prospective retirees purchasing recreational properties with the intention of using them as their primary residence, with many agreeing that sales activity attributed to this cohort will rise throughout the remainder of the year (43.0 per cent).
“As Canada’s generational shift continues, prospective recreational property purchasers are coming from both the Baby Boomers and Gen-Xers,” said Soper. “The market is being driven both by those in search of the retirement home of their dreams, and as a place to introduce children to the wonder of the world’s largest and most pristine collection of wilderness areas. Not only do these families view recreational property as a good investment due to its relative affordability and history of steady appreciation in value, but also as a means to start the next exciting chapter of their life.”