Canadians Pursuing Recreational Property for Lifestyle, despite Tax Concerns and Stricter Mortgage Rules
Almost half of Canadians considering buying a recreational property will do so to improve their lifestyle, despite concerns about increasing taxes, rising interest rates and new regulations that require higher down payments on second homes, according to a nationwide survey of Canadian attitudes towards recreational property ownership conducted by Angus Reid and commissioned by Royal LePage Real Estate Services. When buyers were asked why they plan to purchase recreational property, lifestyle was the number one reason given, at 47 per cent. Only one in four buyers say new Canada Mortgage and Housing Corporation regulations reduce their desire or ability to purchase a recreational property. The changes will require Canadians to pay a minimum 20 per cent down payment on any residential or recreational property they purchase that is not their primary home.
Comparatively, Canadians are more concerned about increases in taxation affecting their ability to buy vacation properties, with 49 per cent responding that they are concerned about new taxation rules such as the HST on new-construction homes while 46 per cent express concern about increasing property taxes. Just over one-quarter of those surveyed (26 per cent) want to purchase a recreational property before interest rates start to rise, while 10 per cent said a hike in interest rates would stop them from purchasing.
“Canadians are generally confident about buying recreational properties because they see a pay off in terms of improved quality of life,” said Phil Soper, president and chief executive, Royal LePage Real Estate Services. “The survey results show that tightening of lending requirements for second homes, coupled with an increase in taxes and expectations of higher interest rates, may have a dampening effect on the recreational property market. However, there continues to be strong demand for second homes, and Canadians appear prepared to make significant investments in order to enjoy their leisure time.”
Forty-three per cent of respondents said they would buy a vacation property because it is a good investment – down from 64 per cent in a comparable Royal LePage survey conducted in 2009.
“Fewer people are looking to acquire recreational property for its investment value this year, a direct result of rising cottage prices. The brave bargain hunters that purchased during the depths of the 2008-2009 recession have been rewarded by appreciating prices this year,” Soper said.
One-third of respondents in the 2010 survey said they will not have to make any financial or lifestyle changes in order to afford a recreational property, while 25 per cent of respondents said they plan to rent out their recreational property for part of the year (up from 13 per cent in 2009). Only 15 per cent plan to purchase a vacation home with friends or family.
The survey was commissioned as part of the 2010 Royal LePage Recreational Property Report, an annual market analysis of recreational property prices, trends and activity in selected leisure markets across the country.
The chart below shows the typical price range for standard waterfront, land-access properties across Canada. Properties in BC, Ontario and New Brunswick saw typical 3 bedroom, 100 foot lot properties sell above $1 million. New Brunswick also offered the most affordable properties, with some averaging as low as $65,000.
|2010 Recreational Property Price Summary Average Price Range by Province**|
|Standard Waterfront, Land Access Cottage 1,000 sq feet, 3 bedrooms, 100 foot lot|
|PROVINCE||AVERAGE PRICE RANGE 2010|
|Prince Edward Island||$180,000 – $200,000|
|New Brunswick||$65,000 – $1,000,000|
|Quebec||$326,000 – $650,000|
|Ontario||$140,000 – $1,050,000|
|Manitoba||$189,000 – $360,000|
|Saskatchewan||$245,600 – $600,000|
|Alberta||$300,000 – $555,000|
|British Columbia||$345,000 – $1,500,000|
|NATIONAL AVERAGE||$65,000 – $1,500,000|
According to the national poll, waterfront properties continue to be the most desirable recreational real estate for potential buyers, with 34 per cent ranking a “cottage by a lake” as their number one choice, down sharply from 68 per cent in 2009. Meanwhile, condominiums are the preferred property type for 24 per cent of buyers, up from just six per cent of buyers in 2009.
“Once again, lifestyle appears to be the driving factor behind recreational property trends, as more and more buyers are telling us they prefer the relatively hassle-free ownership of a second-home condominium, where you can spend your weekend on the water instead of whacking weeds,” said Soper.
For almost half of survey respondents, buying a recreational property this year will have little or no impact on their ability to vacation elsewhere. Forty-four per cent said buying a recreational property will make no difference to their vacation plans, while 31 per cent of respondents said recreational property ownership will make them more likely to vacation elsewhere. “This may indicate that buyers intend to use rental income from their vacation homes to finance travel abroad, or it could reflect the growing popularity of international house swapping or exchanges,” said Soper.
In the survey, buyers ranked the most important features they look for in a recreational property. Fifty-five per cent said waterfront or beach access, while 46 per cent answered four-season use, and 43 per cent said their vacation home must be in a quiet location.
|Regional Trends in Preferred Property Types|
|Q: If you were to purchase a recreational property, which of the following are you most likely to purchase?|
|Cottage on a lake||34%||25%||14%||18%||45%||39%||48%|
|Condominium at a resort||24%||27%||29%||24%||24%||16%||8%|
|Property in the woods||5%||4%||6%||3%||5%||8%||6%|
|Mobile home / RV||13%||15%||18%||26%||8%||15%||21%|
|Chalet near ski hill||3%||7%||0%||2%||1%||4%||0%|
Atlantic Canadians prefer cottages or “cabins” more than any other region in Canada (56 per cent compared to the national average of 34 per cent). Atlantic Canadians are also most likely to desire a cottage on a lake (48 per cent compared to the national average of 34 per cent).
At 63 per cent, peace and quiet ranked as the most important feature to potential buyers in the region. This was the highest among Canadians and exceeds the national average by 20 percent. This was tied with waterfront or beach access (63 per cent) and four-season use (29 per cent).
Forty-five per cent of potential buyers in Quebec said that they would not have to make financial and/or lifestyle choices in order to afford a recreational property. This is the highest of any region and 12 per cent higher than the national average.
The most important features for buyers in the region include waterfront/beach access (60 per cent), followed closely by peace and quiet (59 per cent), four-season use (43 per cent) and proximity to amenities (30 per cent)
Quebec, following only Atlantic Canadians, do not feel the expectation of rising interest rates to affect their desire to purchase a recreational property (69 per cent).
The three most important features to potential buyers in Ontario are waterfront/beach access (61 per cent), four-season use (47 per cent) and peace and quiet (40 per cent).
Tied with Alberta and British Columbia, Ontario’s potential buyers are considering buying a recreational property to enhance their lifestyle (49 per cent), more so than any other reason.
Sixty-two per cent of potential buyers in Ontario are likely to be concerned about tax grabs by the government such as HST. This is compared to 53 per cent of potential buyers in BC, where HST is also taking effect.
Second only to Atlantic Canadians, 45 per cent of Ontarians are most likely to purchase a cottage on a lake. This is higher than the national average of 34 per cent and much higher than potential buyers in Alberta, of which only 14 per cent are most likely to purchase on a lake.
In the Prairies, mobile homes are more popular than in other regions in Canada (26 per cent). Greatly exceeding the national average, which saw 13 per cent of Canadians indicating they were most likely to purchase a mobile home or RV.
The three most important features to potential buyers in the Prairies are proximity to amenities (48 per cent), followed closely by four-season use (47 per cent) and waterfront/beach access (41 per cent). Peace and quiet as well as utilities are also important to buyers in the region at 39 and 35 per cent respectively.
Potential buyers in Alberta are considering purchasing a condo as a recreational property more than any other regions in the next 24 months (29 per cent).
More than any other regions, potential buyers in Alberta consider a recreational property’s long term investment potential as a primary reason to buy (49 per cent). This is compared to the national average of 43 per cent. Interestingly, Albertans are just as likely (49 per cent) to consider lifestyle as a reason to buy.
The three most important features to potential buyers in the region are four-season use (51 per cent), proximity to amenities (48 per cent) and waterfront/beach access (42 per cent). This was followed closely by peace and quiet at 41 per cent.
The three most important features to potential buyers in BC are waterfront/beach access (53 per cent), four-season use (44 per cent) and tied for third are peace and quiet as well as proximity to amenities (40 per cent).
Not surprisingly, 12 per cent buyers in the region listed eco-friendly as one of the most important features in a recreational property – the highest in the country. The national average for eco-friendly buyers is 9 per cent.
Forty-nine per cent of potential buyers in BC consider lifestyle to be the reason to purchase a recreational property. This is compared to 44 per cent who consider recreational property ownership as a good investment. The national average considering lifestyle as a reason to buy is 47 per cent, while 43 per cent of potential buyers in Canada see ownership as good investment.
From May 20 to May 26, 2010, Angus Reid Public Opinion conducted an online survey among 1,003 randomly selected Canadian adults who are considering purchasing a recreational property in the next 24 months. The margin of error—which measures sampling variability—is +/- 3.1%. The results have been statistically weighted according to the most current education, age, gender and region Census data to ensure a sample representative of the entire adult population of Canada.