Investors are out, hybrid workers are in: How cottage country found its new normal

Barb Williams was an early adopter. She moved to her cottage full-time in 2018, before the pandemic turned living and working by the lake from a dream to a trend.

She bought her place in the Haliburton Highlands in 2010. By 2018, leaving the cottage on Sunday nights had become so unbearable that she and her now husband, Roger Trollope, decided to move north permanently.

There were challenges. Her daughter, who is now 23, missed her friends in the city and the cottage needed work. It has since been lifted and moved to create a winterized lower level and expanded with new bedrooms, bathrooms, a laundry and rec room.

But it is the improved internet connectivity that Williams, now a realtor, calls a gamechanger" for people like her who live and work lakeside. When she moved to the cottage the internet was so feeble she couldn't download the large files and videos she needed in her previous marketing business.

Last June, we got Starlink," she said, referring to Elon Musk's satellite service. Everyone's getting (it) up here. I've got at least three clients and four friends who, within the last two weeks, have just received their Starlink package."

The acceleration of internet connectivity may be among the lasting legacies of the COVID-19 years in cottage country, said Williams. Now downtown offices are calling and they want their workers back.

It signals the start of a new equilibrium for Ontario's resort communities. Gone are the panicked cottage buyers and short-term rental investors, while lower home and cottage prices continue to make rural areas attractive to the leagues of hybrid and remote workers who have turned their back on full-time office commutes and are now mingling with longtime locals.

Things haven't always been quite as easygoing. In the early days of the pandemic, vacation spots were flooded with urbanites, who moved to their cottages to isolate. As the lockdowns and travel restrictions dragged on, many decided to make the move permanent.

Locals initially resented the influx, disparaging them as cityiots." But concerns ranging from health care availability to runs on groceries have faded and life has mostly returned to normal, said Williams.

It's still too soon to say that the pandemic changed anything permanently. I feel like (it) threw us forward three steps in terms of work-from-anywhere and now we're sliding back a little bit," she said.

Cottage prices are dropping

Over the pandemic, rural property prices soared. What little cottage inventory there was got snapped up in fevered bidding wars.

Every little clapboard shack sold and every mansion sold during the pandemic. People would buy anything," said Phil Soper, CEO of Royal LePage.

After two summers of frenzied buying, however, there's a return to normal in cottage country real estate.

Royal LePage expects a 5 per cent price drop to an average $603,060 for single family homes in resort areas in 2023.

Soper said cottage real estate lags urban markets and this year's decline is due to the same interest rate policy by the Bank of Canada that has seen home prices like Toronto's suffer double-digit price drops since the first quarter of last year.

The slowdown in cottage areas isn't because people have lost interest or because hybrid and home-based work are ending, he said.

Although business leaders are increasingly uncomfortable with remote work, Soper doesn't think they will win the battle to bring workers back to the office full-time.

The pandemic ushered in a trend that's going to stick, which is people aren't going back to the office five days a week in most white collar professions and that can only help cottage country," he said.

Rent in the city, buy in the country?

North York renter Sean Graham works from home full-time, and the IT worker thirsts for water views and lake breezes. He and his wife have been looking at cottages as an alternative to buying a home in the city.

My parents had a cottage that was part of a family thing that ended up getting sold a long time ago. I always remember being able to go there for a couple of weeks in the summer. I just loved being able to look out on the water, being in touch with nature a bit more."

Graham pays about $2,000 for the two-bedroom apartment he's been living in since 2015. To rent the same apartment now would be about $3,000, he said.

Last year, he started looking at buying a three-bedroom condo. One of the units he saw came with a $1.2-million price tag, which would have meant a formidable $240,000 downpayment. In some cases, he said, maintenance fees were as much as rent.

When you add everything up, even with a modest (property) appreciation, it was actually more expensive to buy (than continue renting)," he said.

Twenty years ago you could have bought an entire house for what a downpayment costs today, said Graham. He's been looking at cottages priced between $650,000 and $800,000.

If we got something that was at $650,000, we could pay for the cottage and continue renting for less than if we bought a condo in the city," he said.

Before COVID, you could get an entry level cottage in Muskoka for about $400,000, said John O'Rourke, president of Lakes of Muskoka Realty in Bracebridge.

Now it costs about double that. He described entry level as a 1,000-square-foot, two-bedroom, three-season home with 70 to 100 feet of frontage on a smaller lake.

Short-term rental investors have disappeared

The investors, who were buying up properties to earn short-term rental income, have disappeared and there's a return to the traditional family buyer, he said.

Sales in the area have dropped this year with only 72 in the first four months. In 2021, there were 230 sales in the same period and the 10-year average is about 100.

O'Rourke said about 10 per cent of this year's sales were for more than the asking price. Two years ago, 50 per cent were sold over asking.

The shortage of inventory is helping keep prices relatively stable, he said.

There's a finite number of waterfront properties and people are holding on to it," he said. We're seeing parents and grandparents hand it down to their kids. The kids might say, I don't have an interest in coming up here. I want to cash out.' But right now, people just basically are not putting their places up for sale."

Ken Hale of the Hale Family Sales Team, Kawartha Waterfront Specialists, says a lot of sellers took advantage of the pandemic price spike. He's seen a drop of about 10 to 20 per cent in selling prices this year but that follows a period in which people were taking risks, not understanding the value of the properties they were buying.

All of a sudden you had all kinds of people who never even thought of a cottage that were looking to get into the cottage market and that drove (it) up price wise to the point of being unsustainable and ridiculous in some cases," he said.

People are still looking to buy but there's less urgency, said Hale.

More balanced recreational markets

Re/Max reported that 73 per cent of Ontario's recreational markets are now balanced. It expects prices to rise in Muskoka, Prince Edward County and Haliburton by 2 per cent; prices in the Kawarthas and Lake Simcoe are also forecast to increase by 4 per cent and 5.8 per cent, respectively.

Other markets won't fare as well, said the company's spring report on cottages and cabins.

Kenora and Lake of the Woods is expected to see a 6.5 per cent price decline this year. But Kenora broker Greg Kirby isn't worried.

He was doing yard work in May 2020 when his wife asked him if he would apply for CERB. It was a memorable moment because Kirby seldom had time to do yard work in the busy spring real estate season. The world was still in lockdown, however. Kirby told her he'd give it until Father's Day to see if he needed the federal pandemic assistance.

By Father's Day, I was running," he remembers.

It was just out of this world."

For Kirby, this spring feels like 2019 again. As cottage prices began falling last year, near record high water levels in Lake of the Woods damaged docks and boat houses.

People selling water access cottages probably didn't list them. I had to tear my dock out and I built a new one. Probably eight out of 10 of the property owners on the lake have had to do something similar," he said.

But now those repairs are being finished, and Kirby says people are again looking at listing.

I probably have five coming up in the next four weeks that are water access that did not go on the market last year for this very reason," he said.

During the pandemic people would tell him they were buying a cottage because they couldn't travel or that they would be foolish not to borrow money when the Bank of Canada's key rate was 0.25 per cent. Kirby remembers thinking it was a bit foolish, that the pandemic would end one day.

Asked if those buyers have stayed, Kirby admits, I can't say I've sold anything to anyone that wants to let it go now."

Bidding wars hit like crazy"

Grand Bend agent Mark Pedlar of Re/Max Bluewater Realty says prices were down about 16 per cent in the first quarter of this year to an average of $912,135.

Before 2021, the Lake Huron community might see an occasional multiple offer sale but the bidding wars that hit Grand Bend in the pandemic hit us like, like this crazy phase that came and went," he said.

In spring 2022, Pedlar's office was the busiest it had ever been but sales weren't commensurate with the activity because so many properties went to competing buyers. For sure," he said, some people got in too deep with variable interest rates.

This spring I've had five clients that I sold to in the last year and a half (who) called and said, hey, it's getting pretty tight. Where are we (in the market),'" said Pedlar.

Unfortunately some of these homes are under water" financially, he said, So they can't sell so they're just holding on to see what the market does in the next year or two to maybe really re-evaluate the situation."

In Haliburton, Williams says cottage country offers a lot more property dollar for dollar than the city and she doesn't miss paying $400 a month for her old GTA GO commute.

Now when she comes to Toronto, she and her daughter stay in a hotel and make a holiday of the trip.

I was surprised at how much life there is up here," she said. I always thought moving to the cottage there would be nothing to do. Everybody's playing pickleball. There's yoga, there's all kinds of things for the kids. There's a movie theatre in Kinmount (about half an hour from Haliburton). So, it actually was surprisingly full."

Tess Kalinowski is a Toronto-based reporter covering real estate for the Star. Follow her on Twitter: @tesskalinowski