In 2020 we have witnessed the first government-induced recession. In an effort to protect the health and safety of its citizens, the Ontario provincial government, and others throughout the world, shut down the economy. This process began in March, and in various degrees, it continues to this very day. These shutdowns were, of course, a reaction to the coronavirus and the world-wide pandemic.
Interestingly, the shutdown of the economy, the physical and psychological effects of the pandemic, and ultimately the governments efforts to assist those negatively and economically impacted by the shutdown, had different and in many cases, unequal effects on various sectors and industries in our economy. Real estate sales and especially rural and recreational marketplaces have benefited inordinately compared to other sectors – particularly, travel, entertainment, hotel accommodation, airlines, and many others.
Rural and recreational markets (and even secondary markets) have benefitted and have had record-breaking years primarily for two reasons. Because of the highly contagious nature of the coronavirus, urban dwellers (especially high-rise condominium apartment owners) have sought out space and sanctuary available in rural and recreational areas and regions. Secondly, the pandemic has accelerated forces already at play: namely technology’s ability to allow people to work remotely. Effectively these two very important developments untethered people from dense, crowded urban regions, allowing buyers to move permanently or just seasonally to rural and recreational regions.
So it is with some humility that I begin this report, recognizing that there are many sectors in our economy that have not had banner years – in fact in some cases have had no positive returns, in some cases none at all, since March of 2020.
Throughout 2020, and especially after the implementation of the provincial lockdown and emergency measures, demand for recreational properties skyrocketed. Unfortunately, demand was not matched by supply. The supply of waterfront properties in Muskoka and the surrounding marketplaces has been a problem for more than three years – it was further exacerbated in 2020.
In 2019, 1,359 waterfront properties came to the market from January to the end of September. In 2020, over the same period, only 1,228 similar waterfront properties came to the market. It must once again be emphasized that the 1,359 waterfront properties that came to market were approaching historical lows, so to see a further decline of 10 percent in 2020, in the face of rising demand (for the reasons set out above) created a critical situation resulting in unforeseen competition for those properties that did become available. The end result was multiple offers and rising prices.
Whereas inventory moved downward, sales skyrocketed upward. Year-to-date 898 waterfront properties were reported sold this year. This is almost 40 percent more than the 649 waterfront properties reported sold over the same period in 2019. The chart below visually shows the dramatic increase in sales, driven by the factors set out in the introduction to this market report.
At Chestnut Park, we were able to positively reverse both of these market occurrences. On a year-to-date basis, the number of properties brought to market by Chestnut Park’s realtors actually increased by 24 percent, and sales increased by an eye-popping 78 percent compared to 2019.
It is not surprising that waterfront properties, when they came to market, did not last long. In fact, sales took place at lightening speed. At the end of the third-quarter, months of inventory for waterfront properties had declined to just 1.3 months. This is an 80 percent decline compared to the 6.3 months of inventory available during the third quarter of 2019. The number of months of inventory is the number of months it would take to sell current inventories of available properties at the current rate of sales activity. As months of inventory decline, it means that properties are spending less` time on the market. During the third-quarter waterfront properties spent only 23 days on market, a 36 percent decline compared to the 36 days that waterfront properties spent on the market last year.
Unlike market activity in the past, all regions and areas produced robust results. In the Haliburton region, there were 265 waterfront sales in the third quarter of 2020, an unbelievable increase of almost 80 percent compared to the same quarter last year. This represents the highest level of sales in the region for any previous quarter on record. At the end of September months of inventory were reduced to an unbelievable 0.7 months, while sales took place in only 13 days, down from 33 last year. The average sale price in the region increased by 31 percent to $610,500. It should be noted that in September, Chestnut Park’s Haliburton realtors were responsible for a $4 million sale in the region, the highest price for a sale in Haliburton ever recorded.
Although not as dramatic the market in the Lake of Bays region was similarly robust. There were 64 waterfront properties reported sold in the third quarter of 2020, a 42 percent increase compared to last year. Months of inventory dropped by almost 50 percent from 3.7 to 1.9 months. Waterfront properties in the region spent considerably less time on the market selling in only 26 days, compared to the 54 days it took for waterfront properties to sell last year. Not surprisingly average sale prices skyrocketed, increasing by over 35 percent on a year-over-year basis to $1,015,000. This is a new record for the region.
Sales and sale prices on Muskoka’s three big lakes, Lake Joseph, Lake Rosseau, and Lake Muskoka were also exceptional. There were 183 reported sales on the big Lakes to the end of September in 2020. This compares very favourably to the 162 reported sales for all of 2019, a 13 percent increase. This number is not fully reflected of the activity on the big lakes. During 2020 there were numerous off-market transactions. They are difficult to track and therefore not included in this data. Even without this information, the numbers are still impressive.
What is more impressive is the rise in the average sale price on the three big lakes. Since 2018 the average sale price (for waterfront properties selling for $500,000 or more) has risen dramatically. Lack of supply and increasing demand have been the primary drivers of these price increases. In 2020, and for the reasons set out in the introduction of this report, the pressure on prices has been enormous. In 2018, the average sale price for all recreational properties sold and reported was approximately $2,200,000. In 2020, that number jumped to more than $3,100,000, an increase of more than 40 percent in two years. The average sale price for properties sold on Lake Joseph and Lake Rosseau is even higher. Sales on both Lakes to the end of September were coming in with average sale prices of approximately $3,750,000. The overall average sale price for the three big Lakes was dragged lower by sales on Lake Muskoka that sees more sales of older recreational properties with smaller lake frontages. Having said that, the average sale price for all properties sold and reported on Lake Muskoka was $2,500,000 by the end of September.
This year, even in the face of the pandemic, has been the most successful year for Chestnut Park and its realtors in the Muskoka and area recreational marketplace. Sales nearly doubled in 2020 compared to last year, with our dollar volume for sales reaching $232,235,000 by the end of September, an increase of more than 90 percent compared to the same period last year. Chestnut Park’s realtors dominated sales on Muskoka’s big Lakes, with sales volume almost 130 percent higher than the next best competitor office in the Port Carling area.
Looking forward we do not anticipate that any violent or sudden changes in the Muskoka and area recreational marketplace. There will be a seasonal slowdown, consistent with historical patterns, but all the factors that created and propelled the 2020 market (including, and regretfully, the pandemic) will very likely remain in place well into 2021.