Market

Market

Parry Sound Real Estate | 2024 Market Outlook – Waterfront & Residential

Neighick Lake, Magnetawan

I approach this topic with a sense of humility and caution, fully aware that making predictions about the real estate market is often seen as a risky endeavor. I don't intend for my words to carry undue weight, as I've always been skeptical of such prognostications. However, I do believe in the value of observing and listening to the market's subtle nuances.

My insights are derived from a multifaceted approach. I engage in conversations with my clients and colleagues, both locally and internationally, to gain diverse perspectives. Additionally, I closely monitor the ever-shifting currents within the real estate landscape. I also employ robust data analytics, focusing particularly on waterfront properties. As we weave together these various threads—raw data, market trends, and the collective wisdom of seasoned real estate professionals—an intriguing tapestry of insights emerges.

Parry Sound Region Cottage Sales - All Price Ranges

Georgian Bay, Parry Sound

Parry Sound Region | Historic Average Waterfront Sale Price

Within this mosaic, distinct patterns and dichotomies reveal themselves, growing more pronounced with each layer of analysis. However, I encourage you to view these insights with a healthy dose of skepticism, recognizing that the real estate market is inherently complex and unpredictable.

Let's start with what, in my opinion, are the macro influences pushing and pulling on the Muskoka market.

  1. The Foriegn Buyers Ban - In a nutshell, the Act establishes a prohibition on individuals classified as 'non-Canadians' from acquiring residential properties, whether directly or indirectly, commencing on January 1, 2023, and extending through December 31, 2024. This prohibition encompasses not only major urban hubs like Vancouver, Calgary, Edmonton, Toronto, and Ottawa but also extends its reach to numerous smaller locales, including Squamish, Chilliwack, North Bay, Collingwood, Kawartha Lakes, and Wasaga Beach. It's worth noting that many individuals in these smaller communities may own recreational properties, making this restriction relevant to a wide range of potential buyers. The ban, strangely, does not include the Muskoka or Parry Sound Regions. At first blush one would assume that this would have a positive effect on real estate prices in the areas not covered by the ban. But this rising tide is not lifting all the ships equally. In my experience  buyers from other countries are looking for high-end investment properties, generally over $3,000,000. This creates the first of our dichotomies and it's a strong one. Foreign investment, looking for luxury properties, is now forced to concentrate away from major centers. Muskoka is a prime candidate for all the obvious reasons. Beautiful, close to the G.T.A and lots of impressive properties north of $3,000,000.
  2. Interest Rates - Much has been written about the Bank of Canada's interest rate changes and its effects on real estate. Basically, it's really bad. This is not news. What is news, and what has been overlooked, is that its effect on the luxury real estate market is negligible. The couple buying the $5,000,000 cottage on Lake Joe is  not going hat-in-hand to the bank looking for financing. They're probably just writing the cheque. It's the average family trying to buy an average cottage that are having trouble. As banks tighten up they can be less than keen to lend for a second property, particularly when the carrying cost of the primary residence has gone through the roof. If you look below at the chart of completed transactions, it's cllearly a tale of two markets.
  3. The Covid Factor - As we all know, Covid put unprecedented pressure on real estate prices throughout Ontario and that was pressure was keenly felt in Muskoka. The frenzy began to subside in late 2022 and by spring 2023 it was gone and the pricing gyrations were in full swing. Some sellers were tuned into the new reality of the market and some clung, and are still clinging, to now fizzled frenzy. What I've found interesting is the large  volume of new listings that were Covid purchases. Depending on the area and timelines, up to 1/3 of new Muskoka & Parry Sound waterfront listings have been purchased in the last 3 years. I would also also speculate a large portion were bought to " fix & flip" or "split & flip". There were long waiting lists to get a survey and long backlogs at planning board, both which attest to the number of severances & new builds. With the writing on the wall for a correction, many speculative investors are attempting to exit the market but find themselves underwater.

Parry Sound Real Estate Historical Sale Volumes

Waterfront Properties | Total Units Sold Over $3,000,000

Waterfront Properties | Total Units Sold Under $3,000,000

Residential Properties | Total Unit Sales Over $1,000,000

Residential Properties | Total Unit Sales Under $1,000,000

As illustrated by the charts above, the trajectory of the real estate market, whether in the residential or waterfront sector, is undeniably influenced by your chosen price point. A broader examination of long-term trends reveals a stark contrast: the demand for luxury properties has consistently outpaced the average, while lower-priced properties have seen less favorable conditions.

It's important to underscore that while the overall market has witnessed substantial price increases, resulting in more properties falling into the "luxury" category, the underlying trend lines are conspicuous. This leads to a crucial insight: relying solely on published figures for Median and Average prices may not provide a comprehensive understanding of the market's nuances. Whether you're a buyer or a seller, a more in-depth analysis is essential to attain a clear and accurate picture of the real estate landscape, enabling informed decisions in this dynamic market environment.

Looking Out to the 2024 Market

Here's how I came up with my outlook; I took into consideration the macro factors of Foreign Buyers Ban / Covid / Interest Rates and estimated their market movement as a percentage. I then weighted them equally at 25% each. For the remaining 25% I took into consideration market sediment, input from veteran real estate brokers & my gut. 

The Cottage Market

In the realm of waterfront properties, we anticipate an initial increase in inventory during early spring, with a more rapid uptick as individuals who may have purchased more than they need recognize the evolving market dynamics. Notably, we expect a softening of prices for cottages priced below $3,000,000, with particular vulnerability observed in properties under $1,500,000 and those situated on less sought-after lakes. It's plausible that we could witness a substantial decrease in value within this segment, potentially in the range of 20% to 30%.

Conversely, the demand for luxury cottages, whether from foreign or domestic buyers, I project to remain robust. This is especially true for luxury waterfront properties on Georgian Bay, Lake Manitouwabing & Ahmic Lake. This sustained demand is expected to maintain a favorable supply-demand balance, thereby stabilizing and possibly even driving up prices for high-end cottages, contingent on the potential extension of the current Foreign Buyers Ban.

The Residential Market

It's worth emphasizing that interest rate fluctuations are poised to have a more pronounced impact on the starter and average housing segments than on the high-end market. As we approach the spring season, we anticipate a surge in new listings, driven by mortgage renewals that may render homes unaffordable for a significant portion of potential buyers.

The prevailing interest rate environment will exert significant downward pressure on Parry Sound home prices, potentially resulting in an overall softening of values by 20% to 25%. Unlike the Muskoka region I feel this will apply to all homes regardless of price range.

Moreover, I anticipate a notable increase in vacant property listings, with many properties in the pipeline for severance poised to hit the market. Sellers, eager to recoup (or maybe not) their investments, are likely to contribute to this uptick in listings in the coming months. With the demand side already weak in this category, the incoming glut of properties will exert serious downside pressure.  I peg a 25 - 30% decline across the board for non-waterfront lots and 20% for waterfront lots.

Questions or Comments? We would love to hear from you! Call or text John directly @ 705 783 7718 or find our contact page here.

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