In this series we’ll look at:
• Recently developing trends, in the wake of the post Covid market
• Tax considerations to be mindful of
• Ideas for optimizing your recreational and/or investment property asset
• Navigating potential tricky estate planning considerations.
Cottages were all the rage in recent years past—and that’s precisely why they’re still an investing hot topic in 2024.
The COVID-19 pandemic compelled the Bank of Canada to drop its overnight lending rate to an historic low of 25 basis points. The result was predictable: a frenetic rush for housing across the country. However, because employees had by then begun working remotely, they suddenly had the freedom to live anywhere and cottage country became a natural destination.
Recreational property prices in Quebec rose by 24.5% year-over-year in 2021, and in Ontario they surged by 34.6%. Those located on waterfronts increased by 26.4% and 31.8%, respectively.
But that scorching, unanticipated explosion of buyer demand for cottage properties now poses a dilemma. Following years’ worth of demand front loading into a span of roughly a year and a half, the cottage market experienced such a rapid pace of price increases that sales activity softened on account of there being too few buyers willing, or capable, of meeting those thresholds.
Signs of risk then appeared in the cottage market when the Bank of Canada implemented an aggressive quantitative tightening regime that left some of the more impetuous among those buyers unsure they would be able to renew their mortgages at higher rates in the immediate years ahead. And because cottage prices still hadn’t moderated enough to renew demand, some sellers, desperate to sell, were left regretting their purchases.
Check out part two of this series below where we’ll explore the complexities of tax considerations and estate planning associated with investing in cottage properties.
