As the year draws to a close and interest rates continue to weigh heavily on purchasing power, the real estate market is quieting down in Muskoka. Year-over-year, waterfront sales were off 39.6% in November, while non-waterfront sales were down 34.4%, according to the latest data from the Canadian Real Estate Association (CREA).
Still, a local realtor is anticipating a strong 2023 for Ontario’s cottage country.
Ross Halloran, Broker and Senior VP Sales for Halloran & Associates, Sotheby’s International Realty Canada says, typically, Muskoka sees an uptick in buying and selling activity come spring and early summer, particularly in the waterfront segment. And despite the clear interest rate burden, he expects 2023 to follow suit.
“We never quite fulfilled the buyer demand that had accumulated during the pandemic, between 2020 and 2021,” says Halloran. “What I’m predicting is that the pent-up buyer demand is still out there and that there are sellers now who are waiting in the wings to list. I think you're gonna see more inventory in the spring, probably when the ice clears off the lakes, typically around the middle of April. I think there will be quite a strong market up until about mid-June.”
He adds, “I think that's where we're going to see sale-to-list ratios climbing to more traditional levels of about 95% of list, up from 92%.”
Halloran points to the financial crisis of 2008 and 2009 for historical precedent.
“Back then as now, there was sort of a brief buyer hiatus, if you will, but shortly afterwards the pent-up demand rebounds and doesn't go away, as they're not making any more waterfront property. Buyers are keenly aware of this fact and still want to purchase secondary waterfront homes, so they rationalize the acquisition by prorating their financial investment over a lifetime of use and enjoyment,” he explains. “And while they are price-sensitive to a degree, they want what they want: if they find a property on a lake and it has the right attributes, they will continue to invest.”
While Halloran expects no shortage of demand for Muskoka’s limited share of waterfront properties, he also anticipates certain trends to characterize the year, many of which will bleed into the new year from 2022.
On the buyer side, conditions are coming back in a big way, including finance contingencies and home inspection clauses. On the seller side, vendor take-back mortgages -- they began to resurge for the first time since the ‘90s this past fall -- have become increasingly common as banks lower their risk profiles.
READ: Rising Rates Spurring the Return of Vendor Take-Back Mortgages
Halloran adds that with inflation putting upward pressure on taxes and maintenance costs, properties that have been in families for generations may finally be up for grabs, as boomers -- even those with children or family to pass properties down to -- opt instead to downsize.
And as for who prospective buyers might be, Halloran forecasts “a real market dominance by millennials.”
“I think the aspiration to own the a second recreational home is going to be driven by millennials who are doing very well financially -- plus younger Gen Xers, I think, will also be a driving force to drive sales in 2023.”
And while Muskoka saw an inventory boost back during this past fall, Halloran says it likely won’t be enough to satisfy what has long been an underserved market.
“We're never going to get to a balanced market by 2023 -- balanced market being that the inventory of properties balances the buyer demand,” he says. “And people who are in the market are all essentially looking for the same thing: they want at least 300 feet of shoreline facing west or southwest, they want five bedrooms, four bathrooms, they want a two-storey boathouse, they want to be in the heart of Muskoka. Those properties that hit those key items on the checklist for buyers are always going to be in demand, they're always going to command a premium.
“I think what we're gonna see more inventory this coming spring, but the prime inventory will likely sell quickly while the lesser or secondary inventory is going mostly be a contemplated purchase for buyers, with an increase of conditional offers versus firm sale offers. . But every listing, no matter what, always has a buyer.”
This article was produced in partnership with STOREYS Custom Studio.
