Real Estate Market Report | Muskoka Region, January – December 2022

Prepared by: Chris Kapches, LLB, President, and CEO, Broker

JANUARY 17, 2023

The same factors that saw urban marketplaces reverse course in March of 2022 have had a similar impact on residential and waterfront sales in the Muskoka Region. As the Bank of Canada began implementing its punishing benchmark rate hikes, sales have contracted dramatically. For the most part, the decline in sales has been universal, with no one area, whether price point or location, immune from rising mortgage interest rates. Average sale prices, although also impacted by rising rates have been more resilient and remain higher than average sale prices achieved in 2021, even in the case of residential property sales in the Region.

As this chart clearly indicates residential sales activity, primarily in towns and cities such as Bracebridge, Gravenhurst, Huntsville, Haliburton, and Parry Sound in the west, is off by almost 37 percent compared to 2021. Not only are sales off on a yearly basis, but you would have to go back to 2013 to find such uninspiring sales results. In 2013, 1,953 residential properties were reported sold in the area. Prices, on the contrary, have held up well, finishing the year 8.4 percent higher than in 2022. Notwithstanding the decline in sales, inventory levels have not increased dramatically. In fact, inventory levels are at historic lows. No doubt this accounts for sale price resiliency. The average sale price for all residential properties sold in 2022 came in at $970,060. At the end of 2019, just before the pandemic, average sale prices were approximately $600,000.

Sales activity related to Muskoka and area waterfront properties bears a striking resemblance to residential resale data, with some differences. The decline in sales activity is slightly more pronounced with year-over-year sales off by over 45 percent. Average sale prices have held up strongly, coming in at $1,357,345, over 15 percent higher than they were last year and 65 percent higher than before the pandemic. This number includes all waterfront sales throughout the region. In 2022, there were 857 waterfront property sales. Once again new waterfront inventory coming to market declined in 2022, a pattern that extends back to at least 2015. Although active listings at year-end are higher than last year at this time they are historically low. This lack of available properties is the reason why average sale prices have remained strong and are likely to continue strong in 2023.

Even though active listings increased at the end of 2022, the available inventory of waterfront properties is still more than 33 percent less than pre-pandemic inventory levels. Waterfront property sales in the Bracebridge, Gravenhurst, Haliburton Highlands, Lake of Bays, and Huntsville were consistent with the overall waterfront marketplace. Sales declined by more than 45 percent compared to 2021 while at the same time average sale prices, in varying degrees, remained strong compared to 2021. Waterfront property sales in the Gravenhurst marketplace showed the least decline, coming in at only 29 percent fewer sales than in 2021. Waterfront properties in the Lake of Bays region were the only ones to decline in average sale prices compared to last year. Although prices declined by a little over 3 percent, they were almost 24 percent higher than pre-pandemic average sale prices. Waterfront properties located on the Muskoka Lakes remain the highest priced in the region, although overall this marketplace performed similarly to the overall waterfront market, which includes numerous less expensive properties on the smaller lakes.

Sales declined by almost 50 percent compared to 2021, and like all other waterfront regions, new listings coming to market declined, while at year-end active listings increased. What is remarkable about the Muskoka Lakes marketplace is the power of the local average sale price which came in at $2,357,416, more than 25 percent higher than it was a year ago, and a stunning 45 percent more than pre-pandemic prices.

Activity on Muskoka’s Big Lakes, Lake Joseph, Lake Rosseau, and Lake Muskoka also decline in 2022 compared to previous years. Sales declined year-over-year on Lake Joseph by 35 percent, 61 percent on Lake Rosseau, and only by 18 percent on Lake Muskoka. There is no explanation of why declining sales varied to this extent for each Lake other than the fact that Lake Muskoka waterfront properties are still at a lesser price point and therefore more accessible, particularly in the unsettled marketplace that was experienced in 2022.

It is interesting to note that sales volumes peaked in 2020 and that by 2021 were drifting back towards pre-pandemic levels, although prices continued their upward trajectory. Average sale prices on the Big Lakes have, for the most part, continued to increase, notwithstanding the decline in sales volume. Only Lake Muskoka experienced a decline in average sale price year-over-year. This is due to the volume of sales on Lake Muskoka compared to the other two Big Lakes and the relative lower price point of the available waterfront properties on the Lake.

CHESTNUT PARK’S 2022 PERFORMANCE

Notwithstanding the dramatic decline in the waterfront resale marketplace year-over year Chestnut Park’s realtors produced stellar results. Chestnut Park’s realtors were engaged in more than 225 resale transactions generating almost $420 million in dollar value. Although Chestnut Park’s numbers declined compared to 2021 – depending on location the waterfront marketplace sales volume declined on average by over 40 percent – our decline in sales was less than 25 percent. It is not surprising therefore that Chestnut Park realtors exceeded the next best competitor office in the Port Carling area by almost 100 percent. Once again, even in a difficult, rapidly changing real estate landscape, Chestnut Park’s realtors provided their clients with exceptional professional service and results.

LOOKING TO 2023
It is unlikely that there will be a change in existing market conditions until the second half of 2023. The Bank of Canada’s bench market rate has created prohibitive buying conditions. Unfortunately, due to the Bank’s stated war on inflation, rates will rise during the first half of 2023 although much less dramatically than they did in 2022. Aside from the fact that rising rates increase buyers’ financing costs, they are responsible for buyer uncertainty and ultimately short-term buyer inertia. Based on current economic trends and declining inflation rates, by the second half of 2023 financing costs will stabilize. Once that occurs, pent-up demand coupled with low inventory levels will see the market accelerate. Sales activity by the second half of the year will be consistent with pre-pandemic levels. Once the market noise generated by the pandemic has dissipated it will be remembered that the pre-pandemic waterfront resale market was strong and robust and that the pandemic created a market aberration.