Royal LePage predicts continued stability in Canada’s winter recreational real estate market as interest rates expected to hold or moderate
National single-family home price in Canada’s winter recreational market decreased 0.7% year over year in the first 10 months of 2023
24% of Royal LePage recreational property market experts reported a decline in buyer demand this year as a result of climate factors or environmental disasters, following unprecedented wildfire season
41% of experts reported an increase in inventory as a direct result of rising interest rates
Quebec’s Mont Sutton and B.C.’s Mount Washington/Comox Valley regions recorded highest median price gain in single-family detached segment, increasing 27.3% and 26.5% respectively, year over year
Mont Sainte-Anne in Quebec recorded an 83.4% increase in year-over-year median condominium price; sharp gains reflect wide range in property styles and price points, and scarcity of inventory
TORONTO, November 29, 2023 – According to the Royal LePage Winter Recreational Property Report released today, home prices in Canada’s popular ski regions posted a modest year-over-year decline since the beginning of 2023 as buyer demand continues to soften. This softening is largely due to high interest rates and the rising cost of living as well as a general uneasiness about the state of the economy, the report found. Nationally, in the first 10 months of 2023, the median price of a single-family detached home remained essentially flat, decreasing 0.7 per cent year over year to $1,068,200.
“Although recreational real estate markets vary greatly from one region to the next, activity on the whole in Canada’s winter recreational communities has noticeably slowed. Annual sales are down in most regions and inventory has climbed modestly as the market continues to regain balance. This has not, however, translated to steep price declines in a majority of markets. While the rising cost of living has had an impact on demand for recreational real estate, prices have remained stable due to relatively low supply and sellers’ capacity to hold out for a desirable deal,” said Pauline Aunger, broker of record, Royal LePage Advantage Real Estate. “Market activity is trending back to historical norms, following an unprecedented boost in activity during the pandemic. In addition to a return to normal work and social routines, today’s elevated interest rate environment has exacerbated this cooldown, as consumers are more concerned about mortgage expenses and the overall economy, including those shopping in high-end recreational markets.”
Royal LePage is forecasting that the median price of a single-family detached home in Canada’s recreational ski regions will increase 2.9 per cent over the next 12 months to $1,099,661. This forecast is based on the expectation of stable interest rates through 2024 or a modest decline.
“Recreational house prices in Canada’s popular ski regions are expected to remain stable in the year ahead. While demand has weakened and supply has increased compared to the pandemic-fueled boom, market activity is trending back to normal historical levels. This will keep prices on a modest upward trajectory in the coming year as Canadians continue to seek out a spot on some of the world’s most desirable slopes,” added Aunger.
Rising interest rates weigh on consumers
Since March 2022, the Bank of Canada has raised the overnight lending rate 10 times, lifting its policy rate to a more than two-decade high. Coupled with the rising cost of living, increased borrowing costs have produced a cooling effect on recreational markets, similar to the one felt in the residential segment, although to a lesser extent. Forty-one per cent of recreational property market experts reported an increase in properties for sale in their respective markets as a direct result of rising interest rates, compared to last year. The Bank of Canada is widely expected to hold its key lending rate steady at the next announcement in December.
“Though recreational homeowners may have a higher tolerance for increased costs, they are not totally immune. Many recreational property owners purchase their homes in cash, while others opt for financing,” said Aunger. “Some would-be buyers who require financing are pausing their purchase plans and are waiting for rates to come down to avoid higher monthly payments. Given the current economic climate, some homeowners are finding their monthly expenses too cumbersome, and are cutting costs or downsizing.”
Aunger added that crackdowns on short-term rentals in some municipalities are making it increasingly challenging for recreational property owners to offset increased expenses by renting out their cottages and chalets. Recent changes to legislation were announced in the federal government’s Fall Economic Statement last week, in an effort to encourage homeowners to list their homes for sale or for longer leasing periods.
Recreational markets attract year-round residents
Historically, recreational properties have served as secondary and vacation homes for Canadians. However, since the onset of the pandemic and the shift toward remote work opportunities, more Canadians are choosing recreational markets for their primary residences. The majority of recreational regions surveyed (59%) recorded double-digit declines in the number of homes sold during the first 10 months of 2023, compared to the same period last year. Royal LePage recreational property market experts across the country reported less demand in their respective regions (47%), and an increase in both inventory (88%) and the average number of days on market (82%), compared to 2022.
“While residents are no longer flocking to recreational markets en masse like they were at the peak of the pandemic, when prices and sales were soaring upward, access to high-speed internet in more remote regions has led to an increase in the number of year-round residents,” said Aunger. “We are still adjusting to a softer recreational market that is seeing fewer buyers and rising inventory levels as consumers carefully monitor their discretionary spending under the weight of higher borrowing costs. Unlike purchasing a primary residence, most people in the market for a recreational property have the luxury to wait for the right home to come along, or for more favourable market conditions.”
Unprecedented wildfire season disrupts market activity
Record-breaking wildfires significantly impacted real estate markets during the summer months, including in Canada’s recreational communities.
An unprecedented 16.5 million hectares of land has been destroyed across the country as a result of more than 6,000 fires this year. Dry conditions and extreme temperatures provided the optimal conditions for wildfires to spread throughout Western Canada, the Atlantic provinces, and northern regions of Ontario and Quebec over the summer. The wildfires destroyed hundreds of buildings, and evacuation orders displaced tens of thousands of residents across Canada. Some recreational communities not directly hit by wildfires were also impacted by smoke blowing into their region.
“This was the worst year for wildfires in Canadian history. For those buying or selling a home, this crisis was a source of concern and confusion as dangerous conditions prompted market disruptions,” said Aunger. “As the intensity and frequency of wildfires are expected to increase as a result of climate change, we can anticipate that extreme weather events will continue to influence our recreational property markets and consumer decisions.”
According to the report, 24 per cent of recreational market experts reported a decline in buyer demand this year as a result of climate factors or environmental disasters.
In the first 10 months of the year, the median price of a single-family detached home in British Columbia’s popular ski regions decreased 1.6 per cent year over year to $2,026,400, while the median price of a condominium decreased 1.4 per cent to $525,000. In the province’s recreational market, the median price of a single-family detached home is forecast to increase 4.1 per cent over the next 12 months.
The median price of a single-family detached home in Whistler’s recreational property market for the first 10 months of the year remained flat, decreasing 0.4 per cent year over year to $3,632,400, while the median price of a condominium increased 3.4 per cent to $600,000. For those looking to buy a house or condominium slopeside or at mountain base, prices typically start at $3,000,000 and $1,000,000, respectively. Total sales were down 12.3 per cent year over year in the region.
“Although there are buyers out there, very few people are putting pen to paper at the moment. With all of the conversation around rising interest rates, many consumers – including luxury homebuyers – have temporarily withdrawn from the market and are prepared to wait and see what the Bank of Canada decides to do in December and next year,” said Frank Ingham, associate broker, Royal LePage Sussex. “This year, British Columbia experienced the worst wildfire season on record, which has also driven some business away from recreational markets in the province. In addition to physical dangers, purchasers are concerned over insurance risks. Many insurance policies include a clause which can halt the closing of a property should a wildfire come within a specific radius of the affected home. This policy is pushing some buyers to less disaster-prone markets, and could spell more challenges in the future as wildfires become more frequent.”
Although increased mortgage costs can be more easily absorbed by affluent homeowners, Ingham added that the true effects of higher interest rates have yet to be felt in Whistler. The impact of elevated borrowing costs will likely be seen between 2024 and 2026, when many five-year mortgages will be up for renewal.
Royal LePage is forecasting that the median price of a single-family detached home in Whistler will increase 5.0 per cent over the next 12 months.
The median price of a single-family detached home in Invermere’s recreational property market for the first 10 months of the year increased 1.1 per cent year over year to $659,000, while the median price of a condominium increased 1.3 per cent to $400,000. For those looking to buy a house or condominium slopeside or at mountain base, prices typically start at $440,000 and $275,000, respectively. Total sales were down 23.4 per cent year over year in the region.
“Higher interest rates are having an impact on Invermere’s recreational market. We are seeing more homes come online as mortgage rates have climbed over the past year and a half. The short-term rental market has also seen a boost in supply as homeowners look to rent out their properties to gain additional income to help cover monthly expenses,” said Barry Benson, broker, Royal LePage Rockies West Realty. “As a result, the pool of homes available for sale has increased, which is a welcome sign for buyers who now have more options to choose from. Although demand for Invermere homes has stayed steady, growing supply levels have moderated price growth. I expect this will be the norm for the near future as borrowing rates remain higher than normal.”
Benson added that clients have found it more challenging to sell their recreational properties in 2023 as a result of climate factors. Wildfires burned west, east and south of Invermere in August, prompting evacuations in nearby towns.
“Forest fires have had an impact on the Invermere market, as fires burning close to the community caused disruption during the summer. Still, demand has remained consistent throughout the year,” said Benson. “With its proximity to the Alberta border, buyers from Calgary who are looking for year-round recreational opportunities continue to cross provincial lines to achieve their recreational property goals.”
Royal LePage is forecasting that the median price of a single-family detached home in Invermere will increase 5.0 per cent over the next 12 months.
The median price of a single-family detached home in Revelstoke’s recreational property market for the first 10 months of the year decreased 1.1 per cent year over year to $816,000, while the median price of a condominium decreased 12.7 per cent to $680,000. For those looking to buy a house or condominium slopeside or at mountain base, prices typically start at $4,000,000 and $750,000, respectively. Inventory for slopeside houses is extremely limited in Revelstoke. Total sales were down 1.9 per cent year over year in the region.
“Though our inventory and average days on market have grown, demand for Revelstoke properties has remained somewhat stable this past year. While the frenzy of the pandemic market has dramatically pushed property prices up over time, Revelstoke still provides good value compared to other major ski resort regions, which continues to draw buyers to the area,” said Don Teuton, broker and owner, Royal LePage Revelstoke. “Although wildfires were active throughout the province over the summer, it was not enough to dissuade new buyers from visiting the area, or homeowners from listing their properties. If wildfires occur more frequently, however, this could impact demand down the road.”
Teuton added that rising interest rates have negatively affected the return on investment for rental properties, as higher mortgage costs eat into rental profit. The region has seen a slight decrease in the number of buyers who intend to use their recreational properties for rental purposes compared to last year. Although mortgage costs have increased, Teuton noted that Revelstoke has not seen a material increase in recreational properties for sale as a direct result of rising interest rates.
Royal LePage is forecasting that the median price of a single-family detached home in Revelstoke will decrease 2.0 per cent over the next 12 months, as both demand and inventory levels remain stable.
Mount Washington/Comox Valley
The median price of a single-family detached home in the Mount Washington/Comox Valley region’s recreational property market for the first 10 months of the year increased 26.5 per cent year over year to $1,075,000, while the median price of a condominium decreased 2.1 per cent to $465,000. For those looking to buy a house or condominium slopeside or at mountain base, prices typically start at $700,000 and $280,000, respectively. Total sales were down 47.1 per cent year over year in the region. Lower than usual sales in the region resulted in greater price fluctuation.
“Like many housing markets across the country, Mount Washington/Comox Valley has seen demand soften this year. Home inventory and the number of days properties are staying on the market have increased, giving homebuyers more time and choice when shopping around,” said Rick Gibson, sales representative, Royal LePage in the Comox Valley. “As cash buyers are common in this community, higher interest rates have not prompted many residents to list their recreational homes for sale due to increased mortgage costs. However, more homeowners are renting out their properties, as many paid a higher-than-average purchase price during the peak of the pandemic-fueled market.”
Gibson added that until buyers and sellers gain more confidence about the trajectory of interest rates and the overall economy, home price appreciation and market activity will remain subdued.
“Buyers are drawn to this region not only for its affordability, but also its all-season recreational options, proximity to airports, and access to nearby communities,” said Gibson. “Although there has been a reduction in overall buyer demand compared to 2022, the market continues to receive interest from locals and buyers from other communities on Vancouver Island.”
Royal LePage is forecasting that the median price of a single-family detached home in MountWashington/Comox Valley will flatten, increasing 0.5 per cent over the next 12 months, as buyer demand remains muted.
The median price of a single-family detached home in Sun Peaks’ recreational property market for the first 10 months of the year decreased 21.3 per cent year over year to $1,212,500, while the median price of a condominium decreased 9.9 per cent to $449,500. For those looking to buy a house or condominium slopeside or at mountain base, prices typically start at $1,349,000 and $350,000, respectively. Total sales were down 47.7 per cent year over year in the region, which is located outside Kamloops, British Columbia.
“Higher borrowing costs have put a noticeable damper on the secondary property market this year. Our home sales have dropped by almost half compared to 2022, and the number of days on market has increased dramatically as buyer demand wanes,” said Kyle Panasuk, sales representative, Royal LePage Westwin Realty.
Panasuk noted that inventory has grown compared to 2022 levels. This rise in supply is partially due to an uptick in residents listing their homes for sale as a result of elevated monthly mortgage costs. Meanwhile, short-term rental listings have continued to be in high demand.
“The Sun Peaks rental market has been strong as of late,” said Panasuk. “Homeowners are not only incentivized to rent out their properties on account of increased demand, but also to counterbalance their mortgage payments, which have increased significantly for variable-rate borrowers over the past year and a half.”
Royal LePage is forecasting that the median price of a single-family detached home in Sun Peaks will increase 3.0 per cent over the next 12 months, as buyers are expected to return to the market when interest rates stabilize or dip.