There are a number of factors that a first time home- buyer should keep in mind before investing in a property and if it happens to be a recreational one, then they need to be very careful, according to real estate experts. Buying a recreational home is more of a lifestyle choice, rather than it is about investment, as per several experts. There are some very premium locations that buyers are choosing for their recreational home, like the Muskoka Lakes, Georgian Bay or Collingwood, which lies in the north of Toronto.
The prices in these regions are high because of limited supply and the properties may now be as difficult to afford like one in the heart of Toronto. Hence, potential buyers are now looking towards East Ontario, at real estate in Prince Edward County or towards the shores of Lake Erie.
Why these recreational homes are attractive
It can be said that these kinds of purchases are really good for someone who is going to use it in the weekends or have it as a summer retreat and the properties need to be ideally located about three to four hours drive from the city. These homes could be more affordable than urban housing but they have a slower appreciation than urban homes. Hence, if the properties are not on a lake or not situated close to the mountains, these properties usually tend to follow the market versus lead it as opposed to properties on a good location in Toronto, Vancouver, Montreal or Calgary, that will appreciate much faster.
It has been seen that Canadians have a tendency of buying a recreational land even before they have proper residences, and they often pitch tents or park a motor home till the time they are ready to build. The rising costs of finding a decent home in the urban area is opening this idea more and more to them.
Other market trends worth noticing
A trend has been seen in Ontario that the first home many are purchasing is situated in a cottage country and although it might seem like only a small percentage of the market, it was revealed to be quite a practice as industry experts were conducting field interviews to understand market dynamics. Along with Toronto, there are some buyers in British Columbia who are also opting to purchase a recreational home before they have a regular residence.
There has also been a rise in short term rentals like Airbnb, and cottage rental websites and VRBO could help in offsetting some of the costs that could be facilitating the rental of the recreational home. The buyers are, however, advised to be diligent because there are some rural municipalities like Quebec’s Morin Heights and St. Sauveur who have imposed some bylaws about banning Airbnbs in some zones. Also, buying a recreational property is also largely seen as a luxury. Hence, although some try to justify it as a financial investment because any property will increase in price over time, as mentioned earlier, the rate of appreciation in these homes will be much slower and they are often not predictable as regular urban properties.
In recent times, the sale prices in Ontario and Quebec had currently gone up by 7% and they increased little compared to other urban locations, which industry experts claimed, were an anomaly. Moreover, the recreational housing market almost came to a stop in the years post-recession, but it is strong now again because of increasing employment and because the Canadian dollar has now become more attractive to the US buyer. The return from urban home prices has also gone up. However, it still remains to be a lifestyle-related choice and should not be considered the first option for investment. It could be a gift to the children and be used for special occasions of course.
According to the latest report, the prices overall rose by 5% to $ 411,471 in the last year because of low inventory and the sales plummeted by 8.3%. However, it has also been estimated that the prices are slated to increase by 4.7% this year and this has led to the increased demand in Ontario and Quebec and has also offset softer market conditions in British Columbia. For some buyers, the cost of housing in Greater Toronto at the moment is such that buyers feel that they should buy whatever they can in the real estate and in most cases, it is a cottage and they should be mindful of the fact that the prices of cottages do not move in the same way as they would if the house was in a city like Toronto. So, one is expecting very big gains from their recreational homes, they would be surprised and often not pleasantly.