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What Is Driving up the Prices in Cottage Country?

February 17, 2021 By Samantha 2 Comments

It is mainly Canadians living in urban areas that are driving up prices in the cottage industry, including knowledge workers, seniors, and young families with children. Amidst the pandemic, cottage prices increased by 11.5 percent in 2020, and this trend is expected to continue in 2021. More and more people are choosing to relocate to small towns and rural areas and are buying all sorts of properties, including cabins, chalets, and farmhouses. For many of them, the most important thing is to have a stable internet connection as many are working remotely.

What Figures Tell

While home sales skyrocketed by over 31 percent in November 2020, cottage properties gained in value because of increased demand. Ontario is leading when it comes to price gains, with an increase of close to 30 percent in some places and hikes of 15 percent in Moncton, Montreal, and Ottawa. The recreational property industry is booming in Ontario, with home prices skyrocketing in North Muskoka (17 percent), Haliburton Highlands (28 percent), Gravenhurst (44 percent), and Rideau Lake (25 percent). The prices of recreational homes in Quebec also saw significant gains, with increases by 36 percent in Sutton and 27 percent in the Laurentides. According to senior economist Robert Kavcic working for BMO Capital Markets, the trend is expected to continue in 2021.

Inventory levels have hit record low levels due to increased demand, with buyers from Quebec and Ontario relocating to the countryside. A recent report by Royal LePage confirms this, pointing to the fact that real estate agents in more than half of the regions (54 percent) report increased demand for cottage properties. The report also shows that more retirees are choosing to relocate, with 68 percent of regions seeing a significant increase compared to 2020. Because of the surge in demand, the prices of waterfront properties are up by 13.5 percent to about $498,000, the average price of recreational homes standing at $453,000

In British Columbia, the biggest gains are in Kimberley/Cranbrook (over 27 percent) and Whistler (18.3 percent). Condo prices have also increased by 15.5 percent.

Why Are Prices Going Up

As many businesses, restaurants, hotels, and recreational venues remain closed or are operating at reduced capacity, people don’t really need to be in cities and in a walkable area. It is also true that people are willing to invest more in real estate because they are spending more time at home due to social distancing measures, restrictions set in place across Canada, and lockdowns. As experts note, there are currently two categories of buyers – the first is the worried buyer who believes that the pandemic is never going to end. The second group comprises all those who can do their job from anywhere and have already been working remotely for quite some time. There are other reasons for the recent price hikes, but the main one is that many people are rethinking and re-evaluating their lifestyle, as Vancouver realtor Faith Wilson notes. From shifting to digital and shopping online to changing family and travel plans and health and safety concerns, consumer behaviour is changing which has a significant impact on the real estate market. More people are buying waterfront and ski-hill properties but many are also opting for conventional homes in the countryside. As Royal LePage owner in East Kootenay Philip Jones notes, what they are looking for is raw land.

The ongoing pandemic is certainly driving the exodus to the countryside, with an increasing number of families reappraising urban living. The global health crisis turned the lives of many upside down, from working and schooling to shopping and travelling. Cities where many were born and spent their whole lives now feel like claustrophobic and dangerous places because of repeated lockdowns and tightening and easing of measures. This results in a growing uncertainty as to when and if this will ever going to end. For many, buying a cottage property is like having a place to walk around and breathe, somewhere you don’t stay locked day in and day out. People need more space as their homes have become so central to their lives, with many working, looking after children, exercising, and shopping from home. Cities have long attracted people for the fact that there is plenty to do and crowds of young people socializing. Closures and social distancing simply put socializing on hold. Other factors why people consider relocating to the countryside include distance from family and friends in their community, overcrowding in cities, and lack of gardens.

For others, living and working alongside people who are not following Covid-19 guidelines and social distancing rules is also a factor. There are people moving to the place they grew up to be close to family members and friends. High property prices in metropolitan areas are also forcing many out.

With lockdowns due to recurring outbreaks and waves, more and more people need to be closer to nature. The main reasons impacting purchasing decisions are wanting to have access to a garage or a parking space, to live closer to green spaces, have a pet-friendly home, live in a bigger home, and have a garden. The experience of lockdown in a thirty-story, 2-bedroom condo has made the decision to relocate much easier, especially for those who don’t even have a balcony. Young families with small children are also moving to the countryside to spend lockdowns in more specious properties and to avoid antisocial behaviour due to pandemic fatigue. This is also an option that many families with vulnerable members consider, including those with chronic conditions. Walking along empty streets in cities that look completely deserted feels depressing for many and is forcing them to escape to the countryside. People have all sorts of reasons to relocate, and many have already done that, driving up prices in the cottage country.

2020 Canadian Economic Outlook

January 10, 2020 By Samantha 6 Comments

Canada’s economy is on its way to a modest recovery due to capital inflows and growth in consumption and housing investment and a stronger real estate market. At the same time, a more limited growth is expected due to a mix of global factors such as Europe’s future after Brexit and trade uncertainty at the international level.

Top Performing Sectors and Industries

The fastest growing sectors and industries in 2020 are expected to be transit, subway, and train car manufacturing, cannabis production, and telecommunications networking equipment manufacturing. The list of top performing sectors also includes foreign currency exchange services, and online auctions and e-commerce. These sectors are expected to experience the fastest growth of over 11 percent.

The transit, subway, and train car manufacturing sector has experienced ups and downs over the last couple of years. Volatility can be explained by lower commodity prices and cyclical purchases. In 2019, the sector saw an increase in revenues of 31 percent, and revenues are projected to increase by 12.2 percent in 2020. Companies in the sector offer repair services and produce new freight cars and trains, rebuilt trains, new passenger cars and trains, parts, and new locomotives. The telecommunications networking equipment manufacturing sector experienced steady growth over the past five years and is expected to expand further. Businesses operating in this sector manufacture products such as parts, base stations, switchboards, and telephone sets.

Real Estate

Economic growth is also fueled by a healthy real estate market, especially in cities such as Ottawa and Toronto. Toronto is one of the fastest growing cities in North America, one of the main reasons being immigration. While the residential market has shrunk after the introduction of the mortgage stress test, home prices and sales are expected to stabilize. Ottawa is also performing well and will experience economic growth in 2020. This can partly be explained by migration from other regions and a strong housing market.

The industrial real estate market is also vibrant as evident from the low vacancy rates across Canada, especially in the Greater Toronto Area and Vancouver. Rental rates have increased due to high demand. The office building sector is also a healthy market, especially for downtown properties. This can be explained by the fast growth of the technology sector and a healthy labour market. Rental housing is also in demand as more and more people choose to downsize, including millennials and baby boomers. Demand is also higher for condominiums than single-family units mainly due to affordability, downsizing, growing populations, and increasing urbanization. In the retail sector, there is less demand for power centres, regional malls, and outlet centres. One of the main reasons is the growth of e-commerce.

There is also demand for senior housing as more and more older people choose to move to senior communities with high-end amenities. Developers, however, face major challenges such as regulations and policies and high costs. In 2017, the FPT Seniors Forum Ministers published a report according to which the majority of seniors prefer to live in senior communities but face challenges such as availability and limited access for mobility aids. The report reveals that many senior homes lack safety features, lighting, railing, ramps, and steps.

Possibility of Recession

In December 2019, Express Employee Professionals conducted a survey interviewing some 585 human resource professionals, decision-makers, and businesses. Of them, 46 percent believe that Canada is unlikely to enter into recession during the next 2 years. Still, 20 percent of respondents foresee a recession in 2 years, 18 percent believe that recession will hit in 1 – 2 years, and 12 percent see it coming in 6 months to 1 year. While growth will remain modest, experts share the view that recession is not expected in 2020. The main factors that fuel growth are residential investment, a vibrant housing market, and a strong job market. The real estate market experienced a decline between 2018 and mid-2019 mainly due to higher interest rates, the impact of the mortgage stress test, and restrictive policies introduced in Ontario and British Columbia. In 2019, the slowdown was offset by the creation of over 360,000 jobs in 10 months. Some 78 percent of businesses owners interviewed by Express Employee Professionals shared that they found it hard to fill job vacancies. Indeed, the unemployment rate in Canada has fallen to historic lows. Wage growth is mainly the result of labour shortages.

According to experts, Canada is unlikely to enter into recession at a time when wages are on the rise and unemployment rates are low unless the U.S. is hit by recession. In 2020, the U.S. economy is expected to grow by 2 percent, driven mainly by rising wages and a healthy labour force. Investment will also boost growth as businesses benefit from tax policy changes.

Labour Market Outlook and Jobs

In August and September 2019, Canada’s economy created about 81,000 and 53,000 jobs, respectively. Employment levels remained steady in all provinces and territories and increased in Nova Scotia and Ontario. While the economy added some 400,000 jobs in 2019, Canada is likely to face a tight labour market because more people are about to leave the workforce (late boomers) than enter the labour market (school graduates). Experts predict that from 2026 on, some 100,000 workers will leave the workforce on an annual basis. Immigration will result in a growth rate of 0.7 percent, and the share of immigrant workers will increase from 24 percent to 30 percent by 2040.

Labour Shortages by Province

A number of positions are in demand in Canada, including licensed practical nurse, welders, industrial electricians, and software engineers. Demand for jobs varies from province to province, however. According to the Newfoundland and Labrador Labour Market Outlook 2020, some 3/4 of job vacancies will be in sectors such as healthcare, government services, education, and social science, and equipment, transportation, and trades. Other jobs in demand include administrative, finance, and business occupations and service and sales occupations. Positions that are expected to experience the fastest growth are in sectors such as management, service and sales, utilities, manufacturing and processing, and health. Alberta will also experience labour shortages by 2025, including positions such as transit and motor vehicle drivers, home support and childcare workers, and medical technicians and technologists. Experienced professionals will be in demand across industries such as healthcare, computer and information systems, and transportation and construction.

The aquaculture, horticulture, and agriculture sectors are also expected to experience labour shortages, including positions such as supervisors and operators. In British Columbia, demand for workers exceeds supply as well, especially in sectors such as administration, finance, and business, sales and service, and equipment operators, transport, and trades and related. Other industries that are expected to face labour shortages include government, community, social, and law services and education, management, and healthcare. The sectors with the largest number of job openings include administration, finance, and business (167,000) and service and sales (187,000). Educational counselors, teachers, nurses, and wholesale and retail managers are also in high demand. In addition to high skilled occupations, businesses are looking to hire kitchen helpers, food counter attendants, and cashiers.

Immigrant Workers

Canadian companies are also looking to hire foreign workers and offer work permit visas. Production, manufacturing, packaging, harvesting, fruit picking, and agricultural businesses are offering jobs across Canada. Foreign workers are offered jobs such as delivery driver, packer and picker, and general farm laborer. Other positions include forklift operator, security guard, textile factory worker, and baby doll maker. The construction industry is also hiring workers such as plumbers, welders, painters, and electricians. The hospitality industry is looking to hire waiters and receptionists. Accountants are also in demand.

Financial Markets and the Banking Sector

According to Deloitte Canada, a number of factors have a negative impact on the banking sector, among which changing work patterns, climate change, changing demographic trends, and a significantly reduced banking capacity. This means that only financial institutions that have differentiated capabilities and capabilities of scale will stay competitive.

When it comes to financial markets, Canada’s equity has grown by 18.3 percent in 2019, following countries such as Australia, Taiwan, Germany, the U.S., and New Zealand. In 2020, experts predict slightly better returns for Canada compared to 2019. Financials, materials, and energy make for about 60 percent of key stock. In 2019, the top performing industries on the Toronto Stock Exchange included technology, financials, utilities, and airlines. Experts predict that in 2020, top performing sectors will include technology, airlines, financial services, and electrical equipment and utilities. Companies with the best performing stocks will include Enghouse Systems Limited, Cargojet Inc., Kinaxis Inc., and Equitable Group Inc.

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