Demand Soars for Leisure Actual Property in Atlantic Canada Markets

In today’s Canadian real estate market, the talk of the town is the enormous demand for detached homes in major urban centres, the resurgence of condominiums in large cities, and the rise of quirky properties throughout the country. But there is one segment of the Canadian housing sector that is blossoming into a must-watch development: recreational properties, particularly in the ever-growing Atlantic Canada region. Sixteen months ago, who would have thought that east coast cabins, cottages, and chalets would be witnessing sky-high demand right now?

Since the coronavirus pandemic started early last year, areas of Atlantic Canada that are usually reserved for summertime retreats have transformed into year-round principal residences. No longer are families utilizing cottage country as a weekend escape. Instead, households are relocating to rural communities within New Brunswick and Prince Edward Island, taking their work and school with them.

But as more Canadian out-of-town or out-of-province homebuyers scoop up these limited inventories, it is creating an environment of soaring real estate prices. As other segments of the nation’s red-hot housing sector begins to cool down, will the same trends unfold within the recreational real estate markets in Atlantic Canada? For now, perhaps it would be appropriate to see how specific areas have performed this year.

Suffice it to say, it is a seller’s market across the board in the country’s east coast:

Demand Soars for Recreational Real Estate in Atlantic Canada Markets

The Atlantic Canada recreational real estate markets are experiencing similar trends as typical residential real estate throughout the country: low inventory and strong demand. As is the case, price growth has been surging at levels unseen in decades, supported by flexible working conditions and record-low interest rates.

According to the RE/MAX 2021 Recreational Property Report, here is what industry observers and buyers and sellers are seeing on the ground in Canada’s eastern seaboard:

Charlottetown, Prince Edward Island (2019 to 2021)

  • Waterfront Properties: +24 per cent to $334,447
  • Non-Waterfront Properties: +27 per cent to $360,231

St. Andrews, New Brunswick (2019 to 2021)

  • Waterfront Properties: +132 per cent to $741,650
  • Non-Waterfront Properties: +122 per cent to $350,900

Halifax, Nova Scotia (2019 to 2021)

  • Waterfront: +53 per cent to $698,104
  • Non-Waterfront: +41 per cent to $464,625
  • Water Access: +52 per cent to $673,560
  • Condo: +43 per cent to $392,362

Despite affordability concerns intensifying in this segment of the market in Atlantic Canada, real estate experts agree that recreational properties continue to be an affordable part of the real estate sector in such a volatile environment.

“There’s intense competition among buyers in Canada’s recreational property markets and inventory is stretched thin,” said Christopher Alexander, Senior Vice President of RE/MAX Canada, in a statement. “But Canadians recognize that recreational properties remain an affordable option in such a turbulent market. There are still many recreational markets across Canada that are deemed affordable, despite the growing demand and rising prices.”

Still, it is only a matter of time before recreational markets in Canada, from coast to coast, begin to feel the pressure. As a result, without any specific plan to address inventory concerns, affordable housing options for Canadian homebuyers will continue to diminish.

Other Factors That Need to be Considered

While industry analysts might be looking at ultra-low borrowing costs and enormous capital that out-of-province buyers possess, other factors need to be considered in this post-pandemic market, such as rising building supply prices.

As material prices surge, from lumber to steel to fuel, the cost to construct a home is becoming considerably more expensive. Inflation is a critical issue on the other side of the COVID-19 lockdowns, with nearly everything increasing in cost. For example, it is estimated that even building a shed, which is a standard feature when owning a recreation home, costs approximately $3,000 more to create.

Meanwhile, surveys have found that, in addition to housing affordability, homebuyers also list proximity to water or waterfront, amenities, and good Wi-Fi as essential elements when purchasing a cottage.

Looking Ahead in Atlantic Canada Real Estate

With plenty of discussion and speculation surrounding the potential correction in real estate prices, can recreational real estate in Atlantic Canada markets anticipate the same slowdown? Here is what is being projected for the remainder of 2021 in the key cottage country areas in eastern Canada according to the RE/MAX Recreational Property Report:

Charlottetown, Prince Edward Island

  • Waterfront: five per cent to $351,169
  • Non-Waterfront: seven per cent to $374,747

St. Andrews, New Brunswick

  • Waterfront: five per cent to $778,732
  • Non-Waterfront: five per cent to $368,445

Halifax, Nova Scotia

  • Waterfront: seven per cent to $746,971
  • Non-Waterfront: six per cent to $492,502
  • Water Access: six per cent to $713,973
  • Condo: 5.5 per cent to $413,941

But what about 2022? Financial experts agree that the Canadian real estate market has likely witnessed peak momentum: “it’s still a long way back from the moon,” notes Robert Kavcic, senior economist at BMO Capital Markets. With the Bank of Canada (BoC) likely to raise interest rates next year and the effects of the increased mortgage stress test expected to seep into the housing sector, it should be a riveting next 18 months.

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