We are starting to see the Muskoka real estate market shift. From the frantic 2021 cottage market season right up until recently, holding offers until a specific date has been a popular strategy for sellers to drive up competition for listings. Listings were seeing a large number of offers and disappearing from the market quickly. Now we’re seeing more of a mix – some listings are seeing multiple offers, and some are quietly removing their request for offers when the day comes and passes with nothing.
One factor in the shifting market we’re experiencing is the Bank of Canada raising policy interest rates by 0.5% in April, one of the major goals of which was to bring inflation levels back to their target 2% (vs. the 6.7% reported in March). This is the first time it has raised rates by more than 25 basis points in more than two decades. Higher interest rates mean higher borrowing costs, which lowers demand. We expect interest rates will continue to be increased until borrowing costs are back to pre-pandemic levels of 3%. The next announcement is on June 1, 2022.
The 2022 Federal Budget also puts a few factors into play that could effect Muskoka’s real estate market moving forward. It focused heavily on housing initiatives, including (among others):
A foreign ban on buyers for two years
An anti-flipping tax that removes the principal residence exemption for properties that were purchased and sold within the same 12-month period (with some exceptions). The proposed anti-flipping measure would apply to residential properties sold on or after January 1, 2023.
Sales tax on all assignment sales. Starting May 7, 2022, anyone selling their agreement of purchase and sale to a new buyer will be subject to a tax of up to 26%
Does this mean the bottom will fall out and prices will go way down? Highly unlikely. Historically, we still have quite low inventory. It’s gone up from 2021, but properties are limited – especially waterfront. Plus, the already strong desirability of living in Muskoka has only increased after the pandemic. On top of that, there is still a large portion of the population approaching retirement age, who are looking to relocate to somewhere like Muskoka for their golden years.
If you’re a buyer, it’s time to shake off the fatigue of last season and get back to your cottage search – with less competition.
I have posted the relevant stats for overall waterfront market activity and waterfront market activity by location below, for our more analytically minded friends.
If you’re looking for non-waterfront stats or anything else that I haven’t included please email me at firstname.lastname@example.org. I’d be happy to send it to you!
Under the current blind bidding system, potential buyers submit offers without knowing the contents of competing offers. The seller’s agent must disclose the number of offers received to all other parties who have submitted an offer, but none of the details – whether price or conditions.
The new regulations coming into effect April 1, 2023 would allow sellers the option of an open bidding process. Blind bidding will still be allowed, but it will depend on what the seller wants. Should they chose to opt for open bidding, the brokerages who represent them would disclose details of competing offers.
The Ontario government says these new regulations will help to make the home buying process more transparent, bringing down the rapidly inflating cost of homes. Blind bidding does create an opportunity for sellers to drive up prices by signing back offers for a higher price, with the potential buyer left guessing how much (if any) improvement would actually be needed to beat out the other offers on the table. With that said, it’s hard to see why the majority of sellers would chose to have open bidding with blind bidding still an option.
If this new open bidding process proves to be a popular option, it may increase trust between buyers and their agents – there seems to be a common misconception that agents are the driving force behind not disclosing the details of other offers, when in reality it is the current law. A more transparent process would ease that mistrust – as well as the huge amount of fatigue buyers are feeling in the current market.
I personally don’t think this move will change much – blind bidding benefits sellers, not buyers – so putting the choice in the hands of the seller seems to point to an obvious outcome.
There will be other changes to the Trust in Real Estate Services Act (TRESA) coming into effect in April 2023 as well: simpler standardized forms, and more disciplinary powers to the Real Estate Council of Ontario (RECO), the body in charge of enforcing rules for real estate salespeople and brokers.
Muskoka is a unique, highly sought after and magical place. There are many different kinds of buyers and sellers here. Some merely want a little piece of paradise to escape and camp out in the woods. Others want a mansion on one of the ‘Big Three’, or one of the 2200+ lakes in the district.
And the rest of us are somewhere in between. Waterfront or not, permanent residence or not, we all appreciate being surrounded by water and granite and pine and to do a little swimming, boating, hiking and star gazing.
The privilege can be costly, especially since the pandemic.
Overall prices are up year over year, and have gone up a median value of about $350,000 for waterfront properties since the beginning of 2020.
There were 499 new listings in July and 377 sales. The average DOM (days on market from listing to sale) is 14. Last year the average DOM for July was 23. July 2019 24. July 2018 was 30. We are seeing a trend here.
In terms of dollar volume:
There were 44 sales in Muskoka Lakes. 37 were waterfront and 7 non waterfront. The total dollar volume was $95,220,518.
There were 57 sales in Huntsville. 19 were waterfront and 38 non waterfront. The total dollar volume was $41,870,436.
There were 31 sales in Bracebridge. 10 were waterfront and 21 non waterfront. The total dollar volume was $21,252,027.00.
There were 29 sales in Gravenhurst. 7 were waterfront and 22 non waterfront. The total dollar volume was $19,314,650.00.
There is only a 2.5 month supply of residential properties available currently. The definition of supply refers to the number of months it would take for the current inventory of homes or cottages on the market to sell. Historically, six months of supply is associated with a balanced market between buyers and sellers and a lower level of months’ supply is considered a seller’s market and therefore they can expect to sell faster at a better price. In any market a substantially overpriced property will linger. The key to proper pricing is listing at a reasonable price and encouraging competition. Buyers will only compete when a property is appealing both in terms of features and price.
The trend has been toward less inventory for the last few years – with the exception of a small spike this year due to sellers wanting to cash in on this crazy market.
We do not see the ‘bubble’ bursting. We do not think that there is a bubble. It is a case of supply and demand. And those demanding having a lot of liquidity right now, due to many months of not spending in restaurants, on travel, services like spas, house cleaners, clothing, commuting etc. Interest rates remain low. Cottage buyers for the most part have not been negatively impacted financially by the pandemic.
Inventory has been relatively low for the past several years and we can see why when we look at the relatively low total number of cottages versus the potential buying pool. The Golden Horseshoe has a population of over 7.8 million. Say you considered just one percent of that number – that is 78,000 people in the market for a cottage. And that doesn’t count international buyers or buyers in the rest of Canada.
Some buyers are interested in purchasing to rent their places out. There is a lot of money to be made, but buyers should beware. For those who are perking up their ears, these purchases tighten off an already limited supply. Carefully vet your renters. Property damage is a real risk, as is annoying the neighbours with loud and boisterous behaviour. Enough of that, and the townships may decide to ban rentals.
The shoreline is an extremely valuable and important area – not only for personal enjoyment and property values, but for the health of our Muskoka Lakes, and the critters we share them with.
Did you know a natural shoreline can:
Protect against erosion?
A natural shoreline is perfectly engineered to protect against erosion. Native vegetation along the shoreline strengthens the structural integrity of the land and prevents it from falling apart. The roots of the plants grip the earth and provide structure, and the foliage and leaves of the plant reduce erosion caused by rainfall and winds. Aquatic plants and buffer plants right along the edge of the shoreline also lessen the effects of wake hitting the shore.
Maintain or improve water quality?
Buffer plants and shoreline gardens reduce incidences of soil erosion, which has the added benefit of protecting fish habitats.
“One could think of it this way: waterfront plant buffers are like eyelashes to our lakes: they keep the grit and goo out”
Filter overland pollutants and absorb extra nutrients?
Vegetation along the shoreline not only helps slow the movement of surface runoff, but the roots of this vegetation also help absorb surface water – trapping excess nutrients and pollutants in the soil.
An excess of nutrients like phosphorus and nitrogen is one of the factors that can cause an algal bloom – much like how fertilizing your lawn causes it to grow faster. Given that the other main factors are weather related, keeping these nutrients at a reasonable level are the best defence cottagers have against algal blooms. There are many types of algae – an excess of any of these can be harmful to the aquatic ecosystem, but some types (like blue-green algae) can have dire consequences when it comes to our health and the health of our pets. Most other common types of algae are at their most harmful once they’ve died – they sink to the bottom of the lake and decompose, reducing the amount of oxygen available to fish and other aquatic organisms.
Consuming toxins from a blue-green algae bloom can include headaches, fever, diarrhea, abdominal pain, nausea, vomiting, and other more serious effects. It can also kill dogs and other animals. According to the Simcoe Muskoka District Health Unit, “people not on public water supplies should not drink surface water during an algal bloom, even if it is treated. In-home treatments such as boiling and disinfecting water with chlorine or UV and water filtration units do not protect from blue-green algal toxins.”
Blue-green algae does more than just threaten our health though – it also threatens our property values. Of particular note is the 2005 toxic algal bloom in Three Mile Lake in Muskoka, a lake which has had more than it’s fair share of blue-green algae related woes. This toxic bloom resulted in property values on Three Mile Lake dropping by about 25%. I guess that’s not much of a surprise to anyone after hearing about the health risks… but we should also mention how repulsive it can look and smell. According to former Township of Muskoka Lakes Mayor Susan Pryke, the worst hit areas of Three Mile Lake “looked like pea soup, with bits of algae floating in the water, sort of like chunks washing up on shore,” and smelled like “garbage that had been left sitting out too long.” Lovely.
Protect wildlife habitats, while ALSO reducing the number of geese that come on your property?
Throughout their lifecycles, the majority of our native Muskoka species depend on a healthy shoreline. The riparian zone (the area that lines the border of the water, with rich moist soils where diverse plant communities can grow) is used for sources of food and shelter, breeding, migration, and for rearing young. This area is also essential when it comes to preventing geese – geese are attracted to open spaces with easy access to the water, and they like to feed on short grass. If you have a goose problem then I’m willing to bet you probably have a grass lawn. A shoreline barrier of native Muskoka shrubs and tall vegetation can help deter them from hanging out on your property.
Moving into the water from the riparian zone, we enter the littoral zone – the submerged area of shoreline where the sunlight still penetrates through to the lake bottom. According to Muskoka Watershed Council, the littoral zone is “the richest natural environment that most of us will ever come into contact with,” with as much of 90% of the species in the lake either living in or passing through this zone. This area (and the aquatic plants and downed trees that it consists of) is responsible for providing oxygen to the lake, spawning areas, shallow protected nursery areas (for fish and amphibians), foraging areas, and hiding spots.
Protect the economic benefits associated with tourism?
Nature is one of the major appeals of Muskoka! Wait to catch a sunset while you watch a Blue Heron fish nearby, a family of ducks float past, or any number of other native Muskoka species encounters. Or just enjoy floating in a lake that isn’t thick with potentially dangerous, smelly, pea-soup like blue-green algae… either way, if the health of our lakes isn’t protected it will result in major tourism-related economic losses down the line.
So, how do you naturalize your shoreline?
Getting started with naturalizing your shoreline doesn’t have to be some gargantuan effort – there are some very low effort ways you can get started on your journey to a healthier shoreline for your Muskoka cottage. Let’s look at a few ways you can help work towards a more natural Muskoka, in order of increasing difficulty…
Creating a no-mow zone near the shoreline to allow vegetation to re-establish
This one could not be easier – simply leave an area along your shoreline unmowed. It is recommended that you leave at least 10 feet, but any amount of shoreline buffer is better than nothing! Ideally you would also minimize the amount of entries you have into the water, leaving 75% of the length of your cottage shoreline to re-naturalize.
Bonus points if you follow this “no-mow” philosophy in the shallow water along your shoreline by using your dock as a bridge to get over the weedy shallow parts of the water rather than clearing the weeds to create a swimming area. That way you can still enjoy a clear area to enjoy the water, without harming this essential habitat.
Placing or allowing woody debris to accumulate along the shoreline
Unless a fallen tree is a hazard to boats or swimmers, consider leaving it be! Not a lot of shoreline trees fall around the lake during a year… and clearing a bunch of them away at once can have disastrous consequences to the habitat they were supporting. By the way, submerged wood not only creates hiding and spawning spots for fish, it’s also a major food source for crayfish, aquatic insects, and small fish.
Active planting of native species
So, you’ve already begun to leave the strip of land nearest to your shoreline alone to re-naturalize… but why not help it along even more by planting some native grasses, plants, shrubs, and/or trees? This is also beneficial in terms of appearance – Muskoka has so many beautiful native plant species, so there’s no need to sacrifice the aesthetics of your cottage. People are often surprised how much they love the look of a naturalized shoreline garden.
Removal or “softening” of existing hard structures like retaining walls
While these hard structures may provide a temporary solution to erosion, they can cause damage to neighbouring properties. They can also eventually fail and damage the shoreline they were originally placed to protect.
Instead of removing these structures entirely, there is also the option of protecting the wall (and your shoreline) with softer measures such as planting buffer vegetation. In the case of rip rap, planting can be done between the rocks – the roots of the plants will help with structural integrity, and the foliage of the plants will help to protect against erosion from waves.
We all know the frustration. You’re trying to open an email attachment with a photo of your grandkids, look at a real estate listing, get some work done, or even just check the weather… and you’d like to not spend all day doing it! While newer internet technologies like fibre are trying to make that a thing of the past, the coverage is majorly lacking. In many areas the fastest high speed internet is just across the street from near-dial-up speeds, and due to the cost and difficulty of rewiring it doesn’t look like that will be changing any time soon.
Should we just give up and disconnect? No way! Enter SpaceX, with their new Starlink Satellite Internet service. This satellite service will operate via a satellite constellation of at least 12,000 satellites, with more pending approval. According to SpaceX, Starlink will offer speeds up to a gigabit per second – a far cry from rural cottages which often max out at a speed of up to 5Mpbs (a 995Mbps difference!). During the beta testing phase, customers are expected to experience speed variations from 50 – 150Mbps. Even places that currently have no internet availability at all will finally be brought into the 21st century.
This is not traditional satellite service – Starlink’s satellites are in low earth orbit, which will not only make the service more reliable, but will also help keep down space debris. Each satellite is fitted with an onboard propulsion system to deorbit at the end of its life, and in the unlikely event that system becomes inoperable the satellite will burn up in the Earth’s atmosphere within 1-5 years. At the higher altitudes used by traditional satellite services, this could take hundreds or even thousands of years. Satellite service also means that unlike fibre, you won’t have to have anything wired to your home to receive the fastest speeds available.
Though it is not fully ready for consumers yet, it is operational! Check out this tweet from Elon Musk, sent in October 2019 via Starlink internet!
He followed up with a second Starlink tweet – “Whoa, it worked!!” According to SpaceX, “Starlink is now delivering initial beta service both domestically and internationally, and will continue expansion to near global coverage of the populated world in 2021.”
While we truly do look forward to being able to work online at less molasses-like speeds, I, for one, will be celebrating laser-fast internet with a good ol’ Netflix marathon in my PJs!