Although cottage country market remains red-hot, a prices growth slowdown is possible in the second half of 2021
In case you believe prices for detached and semi-detached houses in Canada are sky-rocketing, pay attention to Ontario’s cottage country.
The recent report by the Canadian Real Estate Association (CREA) says the national home prices were up by 20.1% annually. Greater Toronto showed a 16.5% year-over-year gain, while Greater Vancouver reported a 6.8% increase.
However, such results are almost nothing compared to prices growth in Ontario’s recreational housing market.
In March, the Grey Bruce Owen Sound region saw the average cost for a single-family house rising by 33.3% from March 2020, CREA says. The average home price reached record $646,488, marking a 44.9% annual increase.
According to the Bank of Montreal, cottages here are in a bubble, and the factors that have caused it might be ready to peak in the nearest future.
“Vaccinations are becoming more wide-spread, listings are increasing, and a different tone from the central bank has switched the discussion slightly to interest rates,” – noted Robert Kavcic, senior economist at BMO Capital Markets, adding that people who are purchasing properties in rural Ontario today may stuck with them for a longer period.
The average cost of single-family houses in Kawartha Lakes region was up by 36.9% in March on a year-over-year basis.
At the same time, a single-family property in Lakelands (including Muskoka, Halliburton, Parry Sound and Orillia) rose in price by 42.2% annually to $536,100.
In case of Peterborough and Kawarthas region, the average home cost reported a 59% increase from a year earlier and reached a record $744,760.
According to the Southern Georgian Bay Association of Realtors, representing Wasaga Beach, Collingwood and others, the benchmark price there was $592,500 in March, marking a 40.8% annual gain.
“Although the recreational property market has always been quite unique, the prices have never been this high in relation to interest rates and provincial income,” – BMO’s Kavcic says. “We understand that those things often don’t matter, particularly in case of expensive cottages, but they provide a historical reference. From this point of view, we’re out of control”.
Meanwhile, TD Bank expects home prices to keep rising before they start slowing down by the end of 2021.
“As markets conditions remain tight, more near-term increases are possible,” – noted TD economist Rishi Sondhi.
However, with the prices already up by 31.6% annually, and sales growing by 76.2%, Sondhi believes the increase isn’t long-term.
“We expect certain cooling in sales in the second half of the year, as higher interest rates start affecting buyers,” – he says. “This should also slow down the price growth.”
In the nearest future, a rise in home sales is possible, as buyers try to get in before a stricter stress test for uninsured mortgages takes effect June 1. At the same time, Rishi expects the third wave of the pandemic to restrain market activity.