Vacation properties have soared in popularity in the last few years, and perhaps unsurprisingly, they’re yielding investors promising returns.
In Blue Mountain, just north of Toronto, the number of listings sold in the $500,000 to $600,000 range doubled last year over 2016 and tripled in the $1mln-plus category. Condos are becoming a very important part of the local real estate market because they serve as part-time residences for city slickers looking for bucolic respite and action on the ski hills.
But the Town of Collingwood put restrictions on short-term accommodations by limiting them to certain geographical areas unless they were operational before January 2009. According to Kevin Gilchrist, a Collingwood-based broker with Sotheby’s International Realty Canada, that means investors rent units out for a minimum 30 days or seasonally.
“We’ve had huge restrictions on short-term accommodations in the last seven to 10 years by the municipality, and because there’s basically a moratorium on STAs [short-term accommodations] outside certain geographic areas that are predetermined, those property values have surged in the last five years because now we’re starting to see resale of short-term accommodations,” said Gilchrist. “I just sold a rental that’s almost like a glorified hotel room that seven, eight years ago was selling for $120,000, but that just went out at $316,000. That’s an investor who purchased that to rent out for short-term accommodation.”
The area is home to a growing number of baby boomers preparing for retirement and young, sportive families. The latter cohort is driving demand.
“They’re basically in their late 30s or they’re 40-something with kids,” said Gilchrist. “They want to be able to do a family recreational sport that they could do together instead of sitting on the bleachers and watching their kids. We’re a four-season recreational destination and you can do this all within an hour and a half of Toronto, and that’s what fuels our market—people coming up from the GTA. They don’t want another property to maintain and run, so they rent out a property seasonally for ski season between January and March.”
In Alberta, despite the province’s economic headwinds, the Town of Canmore has thrived. In a 24-month span, tourism has grown manifold.
“With the low Canadian dollar, our tourism numbers have been phenomenal,” said Christopher Vincent, Sotheby’s senior vice president sales. “It’s not just for Americans, it’s also for folks who used to go south of the border but don’t want to pay that premium now.”
Vincent added that the town’s vacancy rate hovers around 2%, and investors who buy rental apartments are getting between $900 and $1,000 per bedroom.
“There definitely has been a lot of investor activity lately,” he said. “When the market was in the pits in 2011-12, there would be up to 115 of these visitor accommodation units on the market at any given time, and now there are about 20 on the market at any given time. In terms of transactions last year, they were probably 10-15% of the market transactions, when six or seven years ago they were only 2% of market transactions.”
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