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Buyers wise to move fast on dream cottage

INVESTMENT REPORTER

Cathie Billings spends a lot of time these days showing people from "away" the many lakes of inland Nova Scotia.

The real estate broker and owner of Royal LePage People First in Bridgewater, N.S., recently sold a $40,000 stretch of land to a couple from Ontario who plan to build on the shores of Crooked Lake. The clients were so impressed with their find, they've asked Ms. Billings to seek out other nearby properties while the prices are still within sight.

The clients are wise to move fast: Prices for vacation properties are soaring across the country.

Doug Macdonald, a financial adviser with Macdonald Shymko & Co. Ltd. in Vancouver, believes two trends will keep vacation property prices appreciating for some time.

First, more baby boomers have paid off their mortgages and have the cash to plow into second homes near ski slopes, lakes and golf courses.

Second, many of those same people plan to move to their second homes when they retire.

As a result, Mr. Macdonald believes, the properties that are most likely to shoot up in value are those that offer water, warmth and year-round living.

"I think there's a phenomenal upside there and I think it's a great investment."

In British Columbia, Mr. Macdonald notes, favoured destinations are the Gulf Islands, Vancouver Island, and Whistler. At least, Whistler was a favourite until prices at the mountain resort shot so far into the stratosphere that a home there is completely out of reach for most people.

"Whistler's gone crazy, so we can't even talk about Whistler any more."

The pressure on prices is not from locals only -- buyers from all of the Western provinces are looking toward the coast for retirement homes, Mr. Macdonald says.

Mr. Macdonald purchased his own solar-heated cottage property in Ontario about 10 years ago when prices in the area were dirt cheap and watched the value soar. But he notes that fluctuations in value mean little to him because he intends to own the property for a long time.

He warns potential purchasers that a vacation property requires much more time and money for maintenance than a city property does.

"Boy, it deteriorates quickly, so you've always got a paintbrush in your hand."

Mr. Macdonald warns that cottage buyers must do their homework to make sure they are aware of potential problems in the regions where they are looking for property.

People who buy a property on an island, for example, may be surrounded by water, but how much water is available for use on the island? In some areas, people may not be allowed to build on the property if there's no fresh water.

Also, the lowest interest rates in decades are helping to fuel the cottage boom.

But if interest rates rise by 3 per cent, he points out, your monthly payment could jump by about 40 per cent or more.

Mr. Macdonald recommends locking in a mortgage rate. "There's a lot more room for interest rates to go up than for interest rates to go down and you'd better cover yourself on the downside."

And Mr. Macdonald cautions that cottage prices -- like house prices -- could be vulnerable to a slide in many markets because they have appreciated so sharply.

He adds that the stability of values in ski areas, etc., is much more volatile than in the big city. The demand for residential real estate is higher because people typically must live close to their jobs and other services.

Pamela Alexander, chief executive officer of Re/Max Ontario-Atlantic Canada, says prices across the country for recreational properties have jumped 15 per cent this year from last as buyers outnumber sellers.

"Pretty much all markets have been plagued by a lack of supply."

Ms. Alexander says the standard three-bedroom, winterized cottage on a lake with road access now goes for about $200,000, on average, compared with $125,000 three years ago.

Meanwhile, the "slamming screen-door seasonal" that many people think of as a cottage has nothing but nostalgia value now, Ms. Alexander says. "Those are teardowns," she says.

In Ontario, where Muskoka is famed for its resident hockey players and movie stars, she says, prices that run into the millions appear to be levelling off.

In Alberta, prime vacation real estate sits on Sylvan Lake, where houses cost between $400,000 and $500,000.

A place on Lake Winnipeg fetches $200,000, but properties on smaller Manitoba lakes are a relative bargain at $100,000.

But the most affordable and beautiful properties can still be found in Atlantic Canada, Ms. Alexander says.

Oceanfront lots can be purchased for $200,000 -- $250,000 includes a modest house on the property. Try paying that for Atlantic beachfront south of the border, she points out.

"If you go to Long Island or Cape Cod, there's nothing under $1-million."

© The Globe and Mail

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