Market
Market
Ontario Cottage Market Outlook | Spring 2025
The cottage selling is approaching in Ontario and some clear trends are beginning to emerge. As we predicted in our Muskoka cottage forecast last year, waterfront listings have been steadily ramping up throughout the province. After bottoming in April 2022 with around 8300 units listed* (12 month rolling average) there has been a steady march upward to just under 10,000 units listed in January 2025. This represents an increase of just over 20% and is the highest since April of 2020.
Conversely, cottage sales across all price ranges are experiencing some of the lowest levels in recent memory.
Another significant metric, the average number of days a listing spends on the market, has surged to 29, nearly doubling from last year. Currently, there's an inventory of almost 7 months' worth of waterfront properties in Ontario, up from 3.4 months in January 2023.
Clearly the often quoted thesis of inadequate supply driving lagging cottage sales does not stand up to serious scrutiny. Provincially they are trending in completely opposite directions and have been for over 12 months.
Softening Demand for Waterfront Property
One of the most reliable indicators of where the real estate market is headed is Google Search Analytics. Nearly everyone considering a cottage purchase begins their search online. By analyzing key search terms related to waterfront properties, a clear trend emerges—search volumes have been steadily declining for several years. This signals a weakening demand. The pattern holds true not just in Muskoka, Parry Sound, and Haliburton but throughout the province highlighting a widespread shift in buyer interest.
Factors Contributing Softer Demand
So why are waterfront cottages just not selling at the same pace as the pre-covid era? There are many key factors and each, while not earth shaking, combine to move markets.
- Interest Rates - Obvious and not new.
- Non-Resident Speculation Tax (NRST) - Also not new but beginning to have an effect on the luxury segment.
- Over-Priced Inventory - In my estimation almost 50% of new listings do not reflect the current market.
- Regurgitated Inventory - Many "new listings" are actually old listings that haven't sold and are re-listed with new photos and write-ups.
- Capital Gains Increases - Has the potential to increase inventory (short term) and lower demand (long term).
- Low consumer confidence - A very strong factor and trending down. See chart below
- U.S. Tariffs - Similar to the stock market, any uncertainty with real estate feeds the bears. See below for more on this.
Ontario's Consumer Confidence
Source - The Conference Board of Canada
Sales of Cottages in Muskoka < $3,000,000
Cottage Inventory | Months Supply
Source - Google Trends February 2025
U.S. Tariffs & Potential Implications for Ontario Waterfront Real Estate
The outlier affecting the real estate market, not just in Ontario but across Canada, is the potential impact of proposed U.S. tariffs on our economy. This is a complex scenario with many moving parts, making it difficult to predict exact outcomes. However, one thing is clear: the implications could be significant.
Canadian MLS® Systems saw a double-digit surge in new listings in January 2025 compared to December 2024. However, sales activity slowed at the end of the month, likely due to uncertainty surrounding a potential trade war with the United States. Home sales declined by 3.3% month-over-month in January, with most of the drop occurring in the final week of the month as the tariffs began to come into focus.
Meanwhile, the number of newly listed homes jumped by 11% from December—the largest seasonally adjusted monthly increase in new supply on record (excluding pandemic-related volatility) since the late 1980s.
“The standout trends to begin the year were a big jump in new supply at an uncommon time of year, as well as a weakening in sales which only showed up around the last week of January,” said Shaun Cathcart, CREA’s Senior Economist. “The timing of that change in demand leaves little doubt as to the cause – uncertainty around tariffs. Together with higher supply, this means markets that had been steadily tightening up since last fall are now suddenly in a softer pricing situation again, particularly in British Columbia and Ontario.”
It's not just the tariffs themselves—it’s the uncertainty they create, weighing heavily on both buyers and sellers. Hesitation around major capital investments is only overshadowed by the anxiety of current owners, unsure if they’ll still have a job next month.
According to the latest Bank of Canada report, Evaluating the Potential Impacts of U.S. Tariffs, several possible scenarios are outlined, all pointing toward higher costs for many goods imported from the U.S. While I’m not an economist, it seems evident that such price increases will lead to higher inflation, which may, in turn, will erode consumer confidence.
A recent report released from Scotiabank Economics, states that potential retaliation on tariffs from the Canadian government, can cause up to a 3% interest rate hike. In my view, the real estate market is already experiencing weak sentiment, and these additional pressures have the potential to exacerbate the stagnation we’re currently seeing.
The cottage market in Ontario could see particular vulnerability as it could create the perfect storm of low buyer confidence on top of the existing supply / demand challenges with looming inflationary pressure.
Our Provincial Outlook In a Nutshell
- Firmly a Buyer's Market throughout 2025 in all price ranges
- Cottage listings to increase 15-20% year over year into the second quarter and then seasonally adjusting downward.
- Price erosion in most areas of an additional 5-10% into the third quarter and then leveling off.
- Higher price vulnerability for cottages under $2,000,000.00, vacant waterfront lots and properties on smaller lakes.
- We anticipate unit sales to drop another 5% from last year to a 20 year + low.
- Expect dollar volume to drop 10% from last year from a softening luxury market.
Our market outlooks are widely followed and factor in many weighted variables. Some of them include Google Search Analytics, article traffic volumes, current market direction, rate of change and general sediment. We are very fortunate to be in communication with many stakeholders including economists, mortgage companies, appraisers and real estate brokerages of all stripes that give us the "straight goods". We aim to provide actionable insights and neither want nor give sugar coated reports.
That being said, they are fallible views & predictions always to be taken with a grain of salt.
Advice for Buyers & Sellers
Cottage Buyers
If you're searching for a cottage you have several advantages currently; Greater inventory to choose from in most areas, substantially lower prices than pandemic times and very few of the dreaded bidding wars. With that in mind, here are a few suggestions.
- Take your time. The pressure is off so don't rush into anything.
- Be informed - You need accurate, current data to know if the listing is correctly priced for the market
- Use a Realtor® and lawyer that actually know waterfront real estate. You're not buying a condo in the GTA.
Cottage Sellers
If you're considering selling in the current market things are challenging but by no means disastrous. Properties priced well are still moving in all price ranges.
- Think very pragmatically, take emotion out of the transaction. It can be very difficult to think objectively. Once again this can be very difficult, particularly if the property has been in the family for some time.
- It is imperative to have a realistic listing price right from the start. Overpriced properties will get crushed in this environment and days on market are not your friend.
- Talk to a reputable real estate agent that really knows your area, your lake and the market. Waterfront real estate is not the same as selling a condo in Toronto.
Although we report trends and forecasts for all of Ontario's cottage country we know the lakes best where we live and paddle the most. If you're pondering buying or selling in Muskoka just contact us, we would love to help. You can find the current Muskoka Cottages for Sale here.
Contact John Fincham, Broker @ RE/MAX Parry Sound Muskoka Realty Ltd.Brokerage.
* Data source ITSO which covers most of Ontario's cottage country.
