This article was originally published in the 2019 Spring issue of Invest In Style Magazine.
Picture your lakefront cottage in rural Ontario: early morning fishing on a placid lake, sipping refreshments on your deck with the smell of spring in the air, flowers in bloom, and the wind whistling through the pines. This is the lifestyle that millennials romanticize. Forget purchasing a home in one of Canada’s bustling urban centres – recreational properties have become the new ownership dream for millennials.
According to recent studies, almost two-thirds of young people in Canada would consider buying a recreational property over the next decade. In fact, reports show that millennials are twice as interested in owning a recreational property than the rest of the population. Which begs the question: why are millennials suddenly interested in cottage living? Before 2017, Canadian recreational markets were mainly driven by retirees, so why the abrupt variation in buyer demographics? Two intersecting trends can account for this change.
Primarily, the rise of the sharing economy has had a big impact on the way millennials invest in properties. With the prominence of social media, came the rise of the sharing economy: an economic system in which assets or services are shared and swapped between private individuals (often facilitated through community-based online platforms such as AirBnB, Uber and Bunz). In such economic conditions, tech-savvy millennials aim to leverage their recreational or country properties to offset costs and make extra money. Although they can escape to their cottage home for recreational purposes, such properties often aim to serve as long or short-term rentals. In many locations, recreational homes are much more affordable, so the logic of entering the real estate market via cottage homes is turning into an obvious choice. Millennial buyers are using recreational homes as a profitable asset and a clever way to enter the real estate market.
Secondly, sky-high real estate prices in urban markets, such as in the City of Toronto, are constantly altering the housing ladder. The average sale price of a detached home in the City of Toronto exceeded $1.1 million in 2018 – a staggering amount for a young person who wants to purchase a home. While housing costs continue to grow over time, average individual incomes remain little changed. In fact, a majority of millennials are making the same income their parents did at a similar age despite being better educated (adjusted for inflation). With such high housing prices in bustling urban cities, millennials are in turn considering cottages for their first home purchase.
The Toronto Region Board of Trade surveyed 803 young professionals and approximately 42 percent indicated they were likely to leave the Greater Toronto Area because of such costs. Real estate prices in Canada’s urban markets are altering lifestyle patterns and are a driving force in the relocation of millennials into recreational properties. Although millennials may not have necessarily moved into their cottage homes, the properties have instead become a way to enter the competitive real estate market. Housing costs in Canada’s major cities are driving millennials into surrounding markets, and today’s sharing economy has allowed them to leverage their property as an asset and investment.
This increasing popularity of recreational properties is reflected in real estate listings and prices. Areas like Haliburton and Prince Edward County are experiencing a surge in pricing. Currently, the 2018 median list price for a waterfront property in Haliburton is $547,450 compared to $392,500 in 2017. Compared to 2017, the 2018 median price of recreational properties, including waterfront, nonwaterfront, and ski-in properties has increased by 13 percent across Canada. This has become apparent in Prince Edward County, one of Ontario’s most popular vacation destinations with a booming country market. With its thriving tourist industry, residents are already experiencing a housing shortage – primarily due to an excess of homeowners renting their properties seasonally on a short-term basis. This unprecedented and non-traditional endeavour may result in drastic changes in our real estate market. It would transform transportation, affordability and, most importantly, working culture. The future, although bright, may be forever altered.
Written by Leticia Gaba