Things are changing in cottage country: Nine Canadians share the financial pros and cons of ownership

For many Canadians, the Victoria Day long weekend is the first one of the year when they drive to the cottage. It’s time to flip on the utilities, drag out the kayaks and clean off the dock.

But the state of Canadian cottage ownership is changing. For people already financially stretched on their primary properties, buying or maintaining a cottage is further out of reach than ever before. That pressure has led many to see their cottages in a new light: a potential source of revenue, a liability or even a full-time home.

When the COVID-19 pandemic started, it brought in a wave of change to Canada’s cottage communities. All of a sudden remote work was possible, Canadians found an enthusiasm for nature, interest rates plummeted and people began rushing from cities to smaller towns across the country.

Markets across the country were suddenly flooded with prospective buyers snapping up countryside properties sight unseen, and property values surged in regions such as Muskoka in Ontario, the B.C. Interior and small towns in Nova Scotia.

In 2021, average cottage prices jumped 27 per cent nationally, and gained another 10 per cent in 2022, according to Royal LePage.

But that spree didn’t last long. By 2023, as Canadians were feeling the double blow of high inflation and soaring interest rates, cottage property markets started to show cracks. In regions such as Peterborough and the Kawarthas in Ontario, year-over-year listing prices dropped by 31 per cent in the first quarter of 2023, from an average of $1.2-million to just over $850,000. Cottage listing prices across the country started to slide, and average listing times dragged longer.

However, prices largely remained above prepandemic highs, and Royal LePage now projects that trend will reverse again in 2024, with a 5-per-cent price gain, given the pent-up demand, low inventory and expectations that the Bank of Canada will cut interest rates this year. While cash plays a large role in cottage purchasing, the majority of cottage buyers still finance those properties with a loan or mortgage.

Today, cottagers and the communities they inhabit are still reeling from the aftermath of the past four years of change, and the dramatic impacts of the pandemic go beyond housing prices. There have been cultural transformations as swaths of city people move to smaller towns, thanks to remote work and reliable internet access.

All the while, locals who have lived in these communities for generations find themselves being pushed out, especially when their salaries can’t match those from out of town, and skyrocketing cottage prices push them out of reach for middle-class Canadians.

Governments at various levels have tried different policies to help an unfolding housing crisis in small communities. Many municipalities in Ontario are regulating the short-term rental market to help preserve housing stock and generate revenue from taxation. The B.C. government made new rules to limit short-term rentals across the province and increased fines for people who flout the laws.

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Names are attached to a post on Shields Road, guiding cottage-goers in the Madawaska area, close to Algonquin Provincial Park.Fred Lum/The Globe and Mail

Meanwhile, the federal government introduced changes to capital gains taxes in the April budget in an attempt to increase levies on the richest Canadians. The inclusion rate for capital gains taxes, which is currently set to 50 per cent, will increase in June to 66 per cent of gains over $250,000 reported in any one year.

This outraged many cottage owners, who bought decades ago and have seen large enough gains to be impacted by the new tax rules. They consider themselves in the middle class – some of them struggle to afford their cottages as is – and resent the fact that they could be taxed at a higher rate when their cottage is sold or passed on as part of their estate.

To better understand the changes in cottage communities, The Globe and Mail spoke to nine people who reside in these areas across the country.

Jaqueline Baptist, 59, Algonquin Highlands, Ont.

For roughly 60 days a year, Jacqueline Baptist rents her cottage out on sites such as Airbnb. But she doesn’t think of the money as income, because it almost entirely goes toward upkeep for her four-season, four-bedroom property in Algonquin Highlands, the costs of which can exceed $10,000 a year.

Even in early pandemic years, where renting generated upward of $50,000 in income, much of that money went back into the property, whether that was for renovations, maintaining the access road or other maintenance that kept the home presentable for paying guests.

Now, Algonquin Highlands is imposing limits on short-term rentals and requiring owners to apply for permits and charge their renters a 4-per-cent tax on top of sales taxes. The charge only applies to short-term rentals, not hotels.

Ms. Baptist, who also owns a condo in Toronto but designates her cottage as her primary residence and lives there for roughly one-third of the year, says there are unknowns in the process: Will she be able to acquire a permit? Will the municipality inspect rental properties and require renovations that bring them up to certain codes?

If she isn’t able to acquire a permit, she’d have to dip into her registered retirement savings plan to pay yearly costs of holding the property. And with her mortgage renewal coming up in late 2025, she expects to take a large hit on monthly payments that have been anchored to a 1.89-per-cent rate in recent years.

It’s a dire outlook, but she’d hold onto the cottage anyway. On one hand, it’ll allow her son an opportunity to get into the property market one day. On the other, there’s an emotional connection she has to the home.

“Cashing in RRSPs is not something you want to do, but cottages are emotional, and when you’re sitting there watching the sunset and listening to the loons, it’s hard to think rationally like you would for other financial decisions,” Ms. Baptist said.

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Michael Ronneseth in the workshop where he builds pre-fab cabins for his business, Bavarian Cottages, in Kamloops, B.C.Marissa Tiel/The Globe and Mail

Michael Ronneseth and Paula Ronneseth, owners of Bavarian Cottages Ltd., Kamloops, B.C.

When the pandemic started, prefabricated cottage builders Michael and Paula Ronneseth’s phone went dead. “They were two months of the quietest time I’ve ever seen,” Mr. Ronneseth said.

As manufacturers of rustic cabins based in Kamloops, the couple sells affordable build-it-yourself cottage kits that go for $30,000 to $90,000, and ships them across Canada and the United States. “They’re very traditional – like what our grandparents would have had,” he said.

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Michael Ronnesethshows a photo from a cabin build near Green Lake, B.C. in his Kamloops workshop.Marissa Tiel/The Globe and Mail

But then people started calling, and within months, orders quickly rose to double what the couple had sold in previous years.

“People got scared of being locked down in their apartment. They wanted somewhere they could escape to,” he said. “Our phones just wouldn’t stop ringing. We couldn’t keep up.”

Over the next two years of frenzy, their materials costs more than doubled, and in some cases quadrupled. The cost of labour increased – the company makes all its products in Kamloops. “We weren’t able to hold our prices. We just didn’t know what the next week would bring.”

But now, Mr. Ronneseth says orders have slowed to a trickle as interest rates have crept up, and as jurisdictions nearby have favoured issuing permits for full-time residences rather than recreational properties in light of the housing shortage.

“People are no longer buying recreational properties at all – that has completely dried up,” he said. “Our business has definitely taken a hit.”

Meanwhile, the company is facing much more competition from imports of log cabins from Estonia, an exporter which he says has gained market share in Canada over the past decade.

But he says the company will pull through the lull.

“I’ve always had the mentality of working lean, even when things were good. We have no debt. Where we saw a lot of companies in the past going broke, like in 2008, that didn’t affect us because we aren’t extravagant,” he said.

Suzanne Hill, Renfrew County, Ont.

Suzanne Hill considers herself lucky to have a cottage that she inherited back in 2001. But rich? Not at all.

That’s why she’s upset that changes in capital-gains taxes in the 2024 federal budget would mean she’ll be taxed at a higher rate if she sold the property or if her son inherited it.

Her cottage is a small 800-square-foot cabin that isn’t winterized. When she inherited it, it was probably worth $100,000. Today, it’s likely worth closer to $500,000.

Ms. Hill doesn’t particularly care that the value inflated so much. To her, the most important things are having a getaway to nature and keeping a piece of property to pass on to her son, who is in his early 20s.

“Gone are the days when our kids could buy their own property on the lake,” she said.

But even passing on the cottage to her son is hard to imagine. The costs of upkeep have skyrocketed in recent years.

That’s what frustrates her about the capital-gains increase. It could represent tens of thousands of dollars in extra taxes, money that would come out of her estate, and that money could have been used by her son to help pay for the costs of running the cottage.

Two decades ago, she might have spent just over $1,500 a year in taxes, insurance and hydro. Today, the yearly costs can reach $5,000, which she doubts her son would be able to afford if she were to pass away soon.

“When they say it’s a tax on the rich‚ the impact is a lot for someone like me who’s just trying to keep things in the family,” Ms. Hill said.

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In 2017, Joe Vermaire and his wife Jill packed up their primary home and moved full-time into their cottage on Aylen Lake, near Algonquin Provincial Park.Fred Lum/The Globe and Mail

Joe Vermaire, real estate agent, Barry’s Bay, Ont.

After 30 years working as a firefighter in Barrie, Ont., Joe Vermaire was looking for a quieter life.

“My retirement was coming up and I said, ‘Why don’t we sell it all and move to the cottage?’ ” Mr. Vermaire said. “I thought, ‘We’ll never know unless we try.’ ”

So in 2017, Mr. Vermaire and his wife Jill packed up their primary home and moved full-time into their cottage on Aylen Lake, just south of Algonquin Park.

While the couple has some hesitations about living near the lake full-time, he said they have not found it to be “as much of a struggle” as they thought it would be. They found that local towns have all the amenities they need. Satellite internet through Elon Musk’s Starlink has been a “game changer,” and he said it’s a comfort knowing that there’s a hospital nearby. “We look for access to health care, with our demographic,” he jokes.

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Mr. Vermaire took up a job as a realtor, selling waterfront cottages during the summer months.Fred Lum/The Globe and Mail

To stay busy, Mr. Vermaire took up a job as a realtor, selling waterfront cottages during the summer months. He says what has struck him is how much technology has changed how people use – and buy – their cottages.

“When people show up at a showing, one of the first things they do is take their phone out and check for a phone signal,” he said. “A lot of cottage showings that we do are through FaceTime. People don’t even show up. It’s a different world.”

But he says the special shine of “old, quintessential cottaging” by the lake hasn’t worn off. He and Jill canoe often, hike into Algonquin Park and snowshoe during the winter.

“You get used to looking at the window at the beautiful lake. But I still think, ‘I’m a very fortunate person,’ ” he said. “We had to sell everything to attain this property. We worked hard. This is our reward.”

Rachel Markle, 33, Huntsville, Ont.

For more than a century, Rachel Markle’s family has lived in and around Huntsville, Ont. Her great-grandfather helped build the first school in the area. It was never just a vacation getaway for her or her family: It’s their full-time home.

But Ms. Markle and her husband can’t see a way of staying in the community if they have any hope of starting a family and having kids.

They currently live in what they describe as an apartment with “quirks and features,” if you’d consider bricks falling out of the wall, squishy floors and squirrels burrowing into the building as quirks.

Moving to another rental is out of the question. The couple have decent local jobs, but rentals have inflated to prices that they just can’t afford to rent on their local salaries. Saving up for a home in the Muskoka region also feels impossible when investors are buying up many of the townhomes that come up for sale.

Ms. Markle considered moving farther north to places such as Sudbury or east to provinces such as Nova Scotia. But moving is not an easy prospect after spending her entire life in town and having family there.

“In some respects it does feel like losing a part of yourself,” she said.

Ms. Markle hopes people will keep people like her – generational residents with ordinary local jobs – in mind as the region develops.

“Just remember that we still live here,” she said.

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Veronica Proulx-Pilon outside her family cottage in Montpellier, Que., when she first bought it in 2018.Courtesy of family

Veronica Proulx-Pilon, Mental-health counsellor, Ottawa, Ont.

In 2018, Veronica Proulx-Pilon and her husband Jason realized they would never be able to afford to buy a house in Ottawa, where they live with their three children in a rented townhome.

“We come from families who were not able to help with funding for school, or to put money down on a property,” the 36-year-old mental-health counsellor says. “I had a significant debt load from school. It didn’t look possible.”

But property ownership had always been among the couple’s goals as a means of growing their assets and passing them on to their children. So, instead of a house in the city, the family decided to invest in a property farther out.

That year, they bought a small cottage in the lakeside municipality of Montpellier, Que., an hour’s drive from home, for $68,000. Six years later, that two-bedroom, four-season cottage has grown two-and-a-half times in value. It’s now worth $170,000.

“There was a glimmer of hope,” she said. “We were so excited to think that we may actually have intergenerational wealth to someday pass onto our children,” Ms. Proulx-Pilon said.

But the recent changes to the capital-gains taxes have concerned her. Despite it being their only owned property, the cottage does not count as their primary residence, and therefore is not exempt if they were to sell it.

With its proximity to Ottawa and growing development in the Montpellier area, she says, the cottage stands to appreciate in value over the $250,000 annual-capital-gains threshold sometime in the next 20 years. But whatever the family earns will go toward giving her children the financial leg up she and her husband didn’t have.

“Our hope is to eventually sell the cottage, take the proceeds and split it between them, and use that money to help them on their own properties. It’s something our parents never thought about – they were just surviving day to day.”

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Dwayne Primeau racing his Hobie 16 in the annual Run What Ya Brung Regatta, at Molega Lake, N.S., in summer 2022.The Globe and Mail

Dwayne Primeau, IT business executive, Dartmouth, N.S.

The lake community of Beavertail Basin, an hour-and-a-half drive west of Halifax, has always been pretty quiet, Dwayne Primeau said. For the IT company president from Dartmouth, it was the chance to bring his two children into nature and introduce them to the calm beauties of the area near Kejimkujik National Park.

The family first bought a cottage in the area about 10 years ago, and Mr. Primeau joined the Greater Molega Lake Lot Owners Association, where he now serves as president. The association represents about 1,200 lot owners.

Since the pandemic rush, Mr. Primeau says, the community has seen an influx of new development. Before the pandemic, development was growing by 1 per cent a year. That increased to 9 per cent, but the pace then slowed to 5 per cent. Construction has also been driven by Bell Aliant laying fibre-optic cables throughout the area.

Across Atlantic Canada, much of the boost in housing prices has been attributed to buyers from other provinces who were priced out of their own markets. In 2021, the price of the average waterfront cottage in Atlantic Canada jumped by nearly 40 per cent.

“The property values have doubled or tripled. Cottage areas have mirrored what we’ve seen in Halifax in that regard,” Mr. Primeau said.

Nonetheless, his community is still serene and relatively affordable. Only about half of the lots in the area are developed, he said, with lakefront lots going for about $100,000 apiece.

For newcomers hoping to buy a house or cottage locally, he said there is some lingering frustration about the influx of out-of-towners. But he sees the new residents as a positive.

“It’s been really fantastic to see new people coming to the province. We need growth, and we haven’t been experiencing immigration for a long time. For economic prosperity, we need young people moving here.”

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Sunrise over a lake in Muskoka, Ont.flyzone/iStockPhoto / Getty Images

Susan Chang, Muskoka, Ont.

The state of the real estate market in cottage country isn’t the reason that Susan Chang and her husband decided to make some big changes to their living arrangements. But the timing certainly helped.

Ms. Chang has lived in Toronto all her life, and for the past 20 years, she has had a home in the city’s Bloor West neighbourhood. The couple have also had a lakeside Muskoka cottage for a similar amount of time.

Now that their children are grown, the couple decided to downsize to a condo in Toronto’s Roncesvalles neighbourhood and purchase a full-scale home in Muskoka – one on a river instead of a lake, and that features more of the creature comforts that you wouldn’t find in a traditional cottage: a dishwasher, more space and proximity to town.

Ms. Chang says they benefited from a Toronto market that is still hot – their home sold before it was even listed – and a weak cottage market has been more vulnerable to hiked interest rates.

Another reason she and her husband are making the move is because hybrid work became an option as the pandemic took hold.

For now, they plan to split their time between Toronto and Muskoka, making midweek commutes into Toronto to avoid traffic and spending their weekends and some workdays in their cottage home.

Ms. Chang says she likes the impact it’s had on her life in the region.

It’s easier for her to find Asian food in the grocery stores, so she can cook more dishes from her background at home. There’s more variety in dining options in town. And the downtown strip is more pedestrian-friendly after Huntsville widened the sidewalks.

“It now feels like a well populated, nicely planned place,” Ms. Chang said.

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