Canadians see cottage as a safe investment

The crippling downturn has done nothing to dampen the Canadian dream of owning a cottage, cabin or chalet that can serve as a year-round recreational property and, for some, as their primary residence, according to a Royal LePage Recreational Property Report released today.

The poll shows recreational properties are still considered a safe long-term investment, both in terms of wealth and their wellbeing.

The survey found 64% of Canadians view cottage ownership as a sound investment. And to pursue their dream of buying a recreational property, 55% of them would even be willing to make compromises with regards to their financial or lifestyle choices, such as co-purchasing a property with family and friends, renting out their cottage, making the cottage their primary residence, buying a fixer-upper, or moving into a smaller principal home in the city.

“The recreational property market in Canada has been chronically short on supply,” said Phil Soper, president and chief executive of Royal LePage Real Estate Services. “For the first time since the turn of the millennium there is some balance in the market, prices are flat, and people aren’t getting into bidding wars.”

While hard sale statistics for recreational properties are unavailable, Soper said that anecdotally sales have picked up considerably over the past six to eight weeks. But sales are still quite a bit below the 2007 peak. Prices, however, have stayed flat in most parts of the country.

“Certain areas such as British Columbia and Alberta are a little bit off, but in Central Canada — particularly the more expensive properties — people are holding rather than selling at a discount,” he noted.

The busiest areas, so far this year, have been those offering more modestly priced or entry-level properties, such as the Kawartha Lakes district in Ontario.

The three features most potential buyers seek in a recreational property are peace and quiet (58%), access to utilities (50%) and four-season use (39%). Other highly rated features include access to boating and fishing (23%), proximity to amenities (18%), ecologically friendly or “green” sites (17%) and year-round activities (16%).

Given a choice, 68% of Canadians would purchase a recreational property on a lake.

When buying recreational properties, people in different regions look for different features. For example, Soper said Calgarians look for properties that provide a waterfront in summer, and skiing in winter. Those in Nova Scotia look for cottages that provide a lot of summer activity opportunities. But the survey reflects that more and more people are now searching properties they can access year-round.

While it may be a good long-term investment, owning a recreational property comes with added responsibility and costs.

“Take a realistic view of what the property is for, understand the total cost of ownership, and have modest expectations as far as equity consolidation,” Soper says. “Unlike purchasing a property in the city, people buying recreational properties have to realize they are their own utilities department. In general, owners are responsible for everything, from power to water, to procuring building permits, and potentially even maintaining roads.”

In addition, investors need to keep in mind the capital gains tax — which will may accrue upon the sale or gift of a property or upon death — and could become a burdensome legacy for those who inherit it. Click here for more on how to avoid the tax implications of owning a cottage.

(06/18/09)