Vacation home-buying delayed but ready to take off

“We found that the buying season has been delayed by two weeks, and even in some cases it’s been three weeks,” Phil Soper, president and chief executive of Royal LePage Real Estate Services, told CRE Online. “Bad weather typically impacts the regular start of the urban residential resale market as well, but in the recreational property market in particular, it has a more profound effect because it’s compressed into fewer months.”

Soper said he did not have specific statistics to show the effect the weather has had on local markets, but he has heard from his regional managers in recreational communities, such as Whistler, B.C. and Muskoka, Ont., that real estate activity has remained soft.

“But while weather delays intent, it doesn’t change it … We expect to see considerable activity in the coming months – especially in higher-end and luxury segments,” he said in a report released today that suggests consumer confidence in recreational home-buying is growing.

The Royal LePage Recreational Property Report found in a nationwide survey conducted by Angus Reid that 89% of recreational property owners and prospective buyers, who intend to make their purchase in the next 24 months, believe a vacation home is a solid long-term investment.

Those numbers were even higher depending on the province, with 92% of Albertans and 91% of Ontarians believing a second home just makes good financial sense. The sentiment was slightly lower in B.C. and Quebec where 87% and 81% of respondents respectively believed a vacation home was a good investment.

Half of those polled also said they believe a recreational property provides better returns than investing on the stock market, while 29% prefer the stock market and the 21% remain undecided.

Even with an impending series of interest rate hikes, which could bring the Bank of Canada’s overnight lending rate to 3% by mid-2012 according to TD Economics, 57% of respondents said this reality will not influence their decision to buy a vacation home.

Interest rates were even less of a factor according to age with 55% of those between 35 and 54 and 70% of those older than 55 saying that rising rates will not deter them from making a purchase.

The priority of having a recreational property for many families means other expenses will have to be sacrificed. That didn’t seem to be a problem for 35% of the respondents who said they’d be willing to reduce their personal spending throughout the year in order to buy a recreational property.

A majority of respondents (51%) said they would be willing to rent their second property out to offset their mortgage and cover other associated expenses. Still, 32% said they would only rent their property to someone they know.

The shifting sentiment of many buyers who now are willing to use their vacation home also as an income property is a positive sign for the real estate market, Soper said.

“We are seeing more buyers purchase properties with the intent to offer them as rentals. This cost-offset strategy may allow younger families to acquire a cottage earlier in their lives than they would otherwise, and others may be able to buy in a region that would have been out of their reach, price-wise,” he said in a statement. “The purchase motivation for most is not financial planning. It remains lifestyle driven – satisfying the needs and wants of their family.”

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