Buy & Sell Recreational Property in Canada

BUY & SELL RECREATIONAL PROPERTY IN CANADA

Geraldine Santiago, REALTOR

Self-Counsel Press

(a division of)

International Self-Counsel Press Ltd.

USA Canada

Copyright © 2012

International Self-Counsel Press

All rights reserved.

Introduction

Since the early part of 2000, recreational property sales across Canada have increased, and trends are showing that this will continue for some time. Major influences that have given rise to increased sales in recreational property include interest rates at a 40-year low and increased consumer confidence and job security. These factors have led to increased demand for recreational property, particularly near greater metropolitan areas.

First-time recreational-home purchasers should do their homework carefully. Compared to purchasing property in the city or suburbs, there are many more factors to consider when purchasing recreational property. These factors vary and are often unique to specific regions, provinces, and municipalities. Buyers need to educate themselves about bylaws unique to each municipality, as well as provincial and federal regulations that pertain to fisheries, oceans, wildlife, forests, and the environment. Environmental considerations with regard to real estate typically fall under a provincial department of the environment or a ministry of natural resources. Should you wish to alter or make additions to your recreational property near or on water, there could also be federal laws that affect and restrict your intended use of the property.

This book provides basic information for buyers and sellers of recreational homes, in the hope that your recreational-home purchase or sale will be a satisfying and rewarding experience.

What Do You Need to Know about the Recreational Housing Market?

Before purchasing or selling your recreational home, it is important to look at larger market conditions, such as local and national housing prices, mortgage rates, and the amount of new home construction underway. The Canada Mortgage and Housing Corporation (CMHC) Market Analysis Centre assists home buyers and sellers to understand how the housing market is evolving. This resource regularly publishes local market analysis reports and provides information on recent trends in housing market conditions. Your local cmhc market analyst can also tell you if there is currently a buyer’s market, a seller’s market, or a balanced housing market in the area you are interested in.

Buyer’s market

In a buyer’s market, the number of recreational homes available for sale exceeds the demand, so prices either stabilize or drop. With fewer buyers and more homes, not only do you as the buyer have more options to choose from, but you also have more negotiating leverage. You have more time to look for the right home, and you can evaluate the choices without feeling pressure to act quickly.

Seller’s market

In a seller’s market, the seller dictates the price. The number of buyers exceeds the number of properties for sale. In this situation of low inventory, a seller often gets his or her asking price — and sometimes more — because there may be a bidding war in which there are competing or multiple offers.

Balanced market

In a balanced market, there are approximately an equal number of buyers and sellers. If you are a buyer in this market, you will probably not have to go through bidding wars because there are enough recreational properties listed on the market.

Supply and demand

Demand for recreational real estate has already exceeded supply in many areas throughout Canada. Contributing factors are low interest rates, more international buyers, baby boomers reaching retirement age, and a decreasing number of waterfront properties. As a result, the demand for less traditional recreational properties has increased. In many markets, small farms and acreage sales are on the upswing. Also growing in popularity are leasehold properties. In many cases, purchasers of leases (of up to 99 years) are permitted to tear down existing buildings and build to their specifications on the land. (See Chapter 2 for more information about leasehold property.)

Who Is Buying Recreational Property in Canada?

Baby boomers, empty nesters, and retirees are the primary demographic that is buying recreational properties from coast to coast. Many buyers are between the ages of 40 to 60. Many of them can afford a recreational home because they have enjoyed business success or have inherited family money. As well, many Americans, Europeans, Australians, and Asians are attracted to recreational properties in Canada. The impetus to buy recreational real estate is primarily twofold: for personal pleasure and as an investment whose value will increase over time.

What Are Buyers Paying for Recreational Properties?

According to a recent report that covers more than 40 markets from Salt Spring Island, British Columbia, to Shediac Bay, New Brunswick, sales and prices have been increasing over recent years in most markets across the country.

Cottage prices have increased significantly, year after year. Because of uncertainty due to political turmoil around the world, many people are opting to stay closer to home rather than travel abroad. This has had an impact on recreational-property buyers. For example, most purchasers in Newfoundland are from St. John’s and its surrounding communities, and again, they are baby boomers — people with equity in their homes and a double income.

The following sections outline some of the popular regions and the price ranges for recreational properties across Canada.

British Columbia

On British Columbia’s Sunshine Coast, the starting price for a three-bedroom winterized recreational property on a standard-sized waterfront lot can range from $300,000 to $500,000. For the same style of property in the South Cariboo region, the starting price is $200,000, and on Harrison Lake it is $425,000.

Other areas of interest in BC are Whistler and Salt Spring Island, where many properties cost more than $1 million. Americans, Albertans, and to a lesser extent Europeans and Australians are purchasing here. In the Okanagan Valley, in BC’s interior, prices are more reasonable, starting at $200,000.

At the Sun Peaks Resort in southern BC, the market remains well balanced with supply meeting demand. But prices have increased year after year, with a two-bedroom ski-in/ski-out condominium starting at $300,000. Out of town purchasers are from Calgary and Edmonton as well as from the US and the UK.

Alberta

West of Edmonton the starting price for a three-bedroom winterized recreational property on a standard-sized waterfront lot is $175,000. In Sylvan Lake in central Alberta, the starting price is $520,000, although waterfront properties can reach $750,000.

Saskatchewan

In Prince Albert, Saskatchewan, the starting price for a three-bedroom winterized recreational property on the lakefront is $250,000. It is a seller’s market all around with low inventory and high demand for such properties.

Manitoba

In the eastern part of Manitoba, prices vary from $100,000 for a simple cottage to $645,000 for a two-bedroom customized waterfront home on Lac Du Bonnet.

Ontario

In Ontario, huge price tags are not uncommon; in some areas recreational homes can range from $1 million to $6 million. In Grand Bend, at the southwestern end of Lake Huron, the starting price is $400,000 and in the Muskoka Lakes region the starting price is $450,000.

Quebec

In Quebec, recreational buyers are most active in the Laurentians (north of Montreal) and in the Eastern Townships. The Laurentian real estate business has been booming ever since Intrawest invested more than $1 billion in various infrastructure projects to attract the baby-boomer market to Mont Tremblant. With its European style architecture, this resort is a condominium paradise for the pre-retired and active retired who can afford the lifestyle. This unique holiday spot has become the strongest economic player north of the Montreal metropolitan area.

The attraction towards the Eastern Townships is another story. This is one of the oldest regions in Canada, and you can still buy houses that were built during the Loyalist era in the 1800s. Buyers are attracted to the scenic views, particularly around Sutton, Dunham, Frelighsburg, and Brome Lake.

The Brome Lake (Knowlton) area is famous for attracting top buyers from Montreal and farther away. Prices start at $300,000 for a simple cottage, but the sky is the limit if you want a premium lakefront spot or acreage with a view.

Both of these Quebec regions are attracting weekenders and baby boomers, though nowadays Mont Tremblant is also attracting more and more European tourists.

Nova Scotia

A two-bedroom recreational cottage on lakefront property in Lunenburg, on Nova Scotia’s south shore, starts at $158,000, and oceanfront prices soar to $1 million.

In Big Bras D’or on Cape Breton Island, prices for a recreational cottage with accessible waterfront start at $225,000. At a 30-minute drive from Yarmouth, you will find waterfront cottage properties starting at $300,000.

New Brunswick

In Shediac Bay, New Brunswick, recreational properties start at $150,000. It remains a seller’s market in part because with low interest rates, many baby boomers are purchasing recreational properties. One factor that is limiting the number of available properties is that many families are handing their recreational properties down from one generation to the next. Recreational property in the Northumberland Straight area starts at $600,000. Canadians, Americans, Britons, and Europeans are attracted to the area’s reasonably priced land.

Prince Edward Island

Once the best-kept secret for recreational property, Prince Edward Island is gaining in popularity. Currently, a waterfront property starts at $200,000. In PEI, buyers from the United States, Canada, and Europe drive recreational property sales. The external demand has exerted pressure on cottage prices and is making the market less affordable for local residents.

Note that Prince Edward Island imposes ownership restrictions that limit beachfront property to 165 feet. This prevents international developers from monopolizing beachfront properties.

Newfoundland and Labrador

In Newfoundland and Labrador, low interest rates coupled with a shortage of listings have created a seller’s market. Buyers are primarily from out of province and the United States. In Newtown, in central Newfoundland, a three-bedroom oceanfront property, though extremely rare, is valued at approximately $100,000; in Humber Valley, prices can reach $1 million.

The Yukon

Fishing, hunting, skiing (both downhill and cross-country), hiking, rockhounding, kayaking/canoeing, boating, snowmobiling, and horseback riding are all popular activities in the Yukon, and these outdoor sports encourage recreational-property sales.

Popular recreational areas in and around Whitehorse are the southern lakes, in particular Marsh Lake and Tagish Lake, and north of Whitehorse, Lake Laberge and Fox Lake. It is currently a seller’s market, with waterfront property in high demand. Prices range from $100,000 for a cabin that needs to be fixed up, to $500,000 for a luxury cottage with great views. For recreational property not located on waterfront, there is a balanced market, with prices starting at $80,000.

The Northwest Territories

Activities such as trout lake fishing and snow-mobiling contribute to the popularity of this northern area for recreational users. Since 2003, in parts of the Northwest Territories there has been a seller’s market, influenced in part by an influx of new workers building pipelines and working in diamond mines. Cabins in Tibbit Lake, near Yellowknife, start at $60,000, but many properties in this area are located on leased land. Road access during the winter may also be difficult.

Cottage Associations of Canada

Cottage associations exist to help cottage owners who have cottage-related problems or questions. A cottage association can be an invaluable resource when you are buying or selling a recreational property. Some associations include real estate sections on their websites, while others may post only upcoming community activities. Cottagers’ associations can also help in other areas. For example, Ontario cottagers’ associations recently had input into the public consultation process that led to a land claims settlement with the Wahta Mohawk. See the appendix for a list of cottage associations.

A Note about Terminology

If you are new to buying or selling real estate or unfamiliar with some of the commonly used terms, please consult the glossary for definitions. Note that the terms real estate agent and agent are used interchangeably in this book.

Part 1

PREPARING TO BUY RECREATIONAL PROPERTY

1

Searching for That Perfect Recreational Home

There are many options available to recreational home and property purchasers. You must consider your preferences for location and lifestyle. Couples or partners purchasing a recreational home together may need to make compromises or trade-offs. Choosing the right recreational home for you and deciding which areas best suit your needs are very personal choices.

Assess your personal preferences and think about the kind of lifestyle change living on a recreational property would entail, even if it’s for short vacations. For most people, a recreational home does not necessarily translate to living in a rustic log cabin in the thick of the woods. Rather, their ideal recreational home may have all the comforts of home, including custom cabinetry, spacious master suites, a gourmet kitchen, a home theatre system, specialty flooring, nine-foot ceilings, a landscaped backyard, a games room, and more. As a first time recreational purchaser, you need to think about what kind of needs and expectations you have (and determine how unrealistic some of these expectations may be!).

Where Do You Start?

Start looking for recreational real estate properties by scanning classified advertisements, Internet websites, and local real estate magazines. Multiple Listing Service (MLS), put out by the Canadian Real Estate Association, contains in-depth details of properties and is a valuable resource. An MLS feature sheet can contain information such as —

• price;

• total area;

• previous year’s taxes;

• monthly charges pertaining to strata title ownership;

• distance to schools;

• distance to transportation services;

• parking facilities (e.g., garage, multiple car park);

• outdoor areas such as a large lot, balcony, patio, and/or sundeck;

• geographical features, and views from the property;

• nearby recreation centres and/or fitness centres;

• central location;

• type and number of fireplaces;

• swimming pool, hot tub, and/or sauna; and

• library and/or games room.

The MLS feature sheet is a very important document because potential buyers rely on the accuracy of the information. The information is included in a computerized data system to which the real estate board in your area contributes. The list can be obtained from the local board, from your realtor, or by browsing www.mls.ca or www.realtylink.org.

Note that the MLS does not include For Sale by Owner (FSBO) properties on its website. Only properties listed by an agent are included. (See the section Homes for Sale by Owner later on in this chapter, as well as Chapter 16, for more information on FSBOs.)

Factors to Consider When Looking for a Recreational Home

Location, location, location! When searching for your recreational property, think about your and your family’s lifestyle needs. Some things to consider: the type of community and neighbourhood, privacy, preferred activities, accessibility, seasons and climate, strata restrictions, zoning and developments, and home warranty.

Community

Most cottage buyers base their decisions on price, but lifestyle requirements are equally important. Younger couples, for example, often want to be close to a small community where they and their children can enjoy community events and programs.

Recreational home purchasers who are semi-retired or retired may want a more peaceful and tranquil setting, away from the noise and hustle and bustle of a community, and perhaps closer to a golf course or a beach.

Neighbourhood

When considering the neighbourhood you want, look at the area surrounding your recreational home. Are the neighbours similar to you? Are they young couples, families with teenage children, or retired couples?

Talk to the residents in the neighbourhood, and walk around the area to get a better sense of the community. You may want to find out about the local politics: Do the locals resent the number of city people who are buying property for seasonal use? Are there strong views from the locals about whether to allow more density as more recreational buyers move into the neighbourhood? Will you spend enough time in the community to be affected by