Is it (finally) a buyer’s market in cottage country?

While the situation presents a challenge to sellers, it’s an opportunity for those looking to buy their first vacation home. Cottage inventory is high, prices are dropping and mortgage rates have slowly but steadily come back down. We spoke to realtors Megan McLeod and Rebecca Campol of Sotheby’s International Realty Canada in Port Carling, Ont., to learn more and get tips on buying your first cottage in Canada.

Back to work—and away from the cottage

First, how did we get here? It’s a mix of pandemic and politics, according to McLeod. “January was a totally different market than February,” she says, noting that the recreational property market came to “a screeching halt” shortly after President Trump was sworn in. “Buyers were putting the brakes on, hesitating. And as soon as buyers lose confidence because the stock market isn’t performing well or interest rates are going up, it affects real estate.”

While buyers and sellers alike were in a holding pattern earlier this year, things quickly shifted again in the spring. “After the Canadian election [April 28], there was a bit more certainty. You started to see sellers listing their properties, buyers arriving.” Now, there’s plenty of inventory on the market—plus, a lot of highly motivated sellers.

It wasn’t just economic conditions that affected the markets. Many pandemic-era buyers had plans to work from their cottage for some or even all of the year, but were then called back to the office. Others assumed they’d be able to consistently rent out their cottages at inflated rates (some cottage owners were getting as much as $10,000 per week in rent during the pandemic, whereas the same property might get $3,000 per week today). When rental fees dropped back down, maintaining a recreational property became less appealing to some new owners and in certain cases, unaffordable. 

Investing in recreational property

There are plenty of cottages on the market across Canada, which is good news for first-time buyers. With more inventory to choose from, there are fewer bidding wars and less pressure on buyers. “You can do your due diligence,” Campol says. “You have more time to shop around and do inspections.” 

Whether you’re looking for a family vacation home or an investment property, there are certain characteristics to look for if you want your cottage to appreciate in value. Privacy is a huge factor, McLeod and Campol agree, and a low-maintenance property is always a good idea. This doesn’t just mean the landscape around the building, but the materials used on the structure itself. “Construction and labour costs have gone up, so low-maintenance is extremely attractive now and in future,” McLeod says.

A large property with water access will always be in demand, and upgrades like aluminum and glass decks don’t hurt. During the pandemic, many buyers wanted to be close to town with access to a reliable Internet connection and strong mobile phone reception. Also, avoid stairs if you can—a flatter, gently sloping property is more valuable than something on a steep hill with a long staircase to the dock. Your family may be young and agile now, but between guests, grandparents and good old aging, “someone’s knees won’t be able to handle it,” McLeod says.

The best bang for your buck—on any budget

Very few cottages come at bargain prices, but there are deals to be found if you know where to look. The specifics will vary by province and region but generally speaking, smaller lakes come with smaller price tags. In Ontario, locations like Lake Joseph, Lake Rosseau and Muskoka Lakes will always be in high demand, McLeod says, but they come at a very high price point. However, there are lower prices to be found on smaller, lesser-known lakes in the same geographic area. “Look at smaller lakes in Muskoka. Look at Haliburton and the Kawarthas,” McLeod suggests. “You can still get that true cottaging experience—a great cottage on a lake at a good price.”

On the West Coast and in the Atlantic provinces, you may be looking at oceanfront rather than lakeside property. In this case, reliable ferry service to islands and disconnected mainland equates to higher prices. You can find cheaper properties if you’re prepared to get there in your own boat. 

Before starting your search for a cottage, speak to your accountant, financial advisor and/or a mortgage broker about what you can afford. “It’s really important to shop around and not just look at your bank,” Campol advises. “Mortgage brokers will bring you a variety of options.”

Buying a cottage is distinct from buying a primary residence as it’s a discretionary expenditure that has to fit into your existing budget. Instead of comparing your existing mortgage payment to a new one, you’ll be adding a second payment. Even if your primary residence is mortgage-free, you’ll be responsible for maintenance, home insurance and property tax on two pieces of real estate. Plus, you’ll pay tax on capital gains when you sell the cottage. You may want a buffer in your budget in case interest rates go up or your financial situation changes. A professional can help you determine what’s best.

How to search—and negotiate—like a pro

While McLeod and Campol recommend working with an experienced, trustworthy realtor, they shared some tips and best practices for DIY cottage-searchers. “When you look at a listing, consider resale. Is the cottage on a year-round road? Is it winterized? Look at the water quality of the lake,” McLeod advises, noting that the local health authority and provincial environment ministry will have records about things like poor water quality and algae blooms, which should be a deterrent to buyers. 

Campol suggests being open-minded with your search. “Know your needs versus your wants, and look outside the box to find the right fit. Don’t just focus on the big lakes.” She also suggests shopping over the fall, winter or early spring rather than in peak cottaging season.

Flexibility is key, McLeod adds. “You never find a 10-out-of-10 cottage, no matter what your price range is—that doesn’t exist. People always want to take one cottage and put it on another lot!” Instead of looking for perfection, focus on getting as many of those wants and needs as you can within your budget.

When it’s time to negotiate, ask questions first. If you’re working with a realtor, ask them to find out why the sellers listed the property. Money isn’t everything to some cottage owners, and this information can help you negotiate the details of a purchase agreement. For example, if you buy a property in the winter or spring but agree to hold off on closing until the fall, that gives the seller one last summer on the lake—a detail that could help seal the deal at a lower price.

In a buyer’s market like we’re experiencing now, McLeod urges clients to slow down and take their time. If you put in an offer and the seller doesn’t accept it, it’s OK to wait a few days before countering. And in the absence of a bidding war, feel free to toss a lowball. “There’s no harm in going in with a lower offer right now.”

Finally, in a cooler recreational property market, make use of conditions to protect yourself. “Use financing conditions, a home inspection, get a water quality test,” Campol says. “Look at insurance. Take the time to review documents and really do your due diligence.”

If you’re ready to make a move, go for it

The current market is ideal for first-time cottage buyers, but many will consider waiting things out to see if prices (or interest rates) drop further in the months ahead. While this is possible, the pendulum can also swing the other way—so if you’re in a good position to buy now, don’t hesitate, McLeod says. “Buyers often miss opportunities because they were waiting for a better deal. The market can swing back up and then you’ll have regrets.”

Read more about real estate investing:

• Yes, a cottage is an investment property—here’s how to minimize capital gains tax
• How much income do you need to buy a home in Canada?
• What to do if your pre-construction condo has dropped in value
• The best 5-year fixed mortgage rates in Canada

About Erin Pepler

Erin Pepler is a freelance writer based in the Toronto area. A frequent contributor to MoneySense, she is also the author of Send Me Into The Woods Alone: Essays on Motherhood.