While it’s true that some things never change, technology, contemporary lifestyle and state-of-the-art options like Airbnb and Vrbo are redefining the perception, the strategy, the purpose and the value of recreational properties.
In addition to traditional things like family good times and the joys of relaxing getaways, there are new recreational property factors to consider. The impact of work-by-remote technology. The cost of maintenance and property management. Taxes. And navigating the tricky pros and cons of recreational properties as investments.
According to the industry-respected Royal LePage (RLP) Winter Recreational Property Report, home prices in Canada’s popular recreational property areas remained virtually flat for most of 2024. “Much like the mainstream urban housing market, sales activity in recreational regions has been treading water for most of last year,” says Phil Soper, president and chief executive officer of Royal LePage. “The time it takes to sell a property, what we call ‘days on the market,’ has been longer than normal over the past year, and recreational home prices have remained stable as low supply balanced sluggish buyer demand.”
The close-to-Calgary areas like Canmore, the Shuswap, Osoyoos to north of Calgary in Sylvan Lake seem to be exceptions. Demand is up. Supply is down. Benchmark prices in all segments are up. And inventory is low.
Canmore is probably the most referenced recreational property template, even though it is also a bit of a high-end anomaly. The RLP Report detailed that the median price of a single-family detached home in the Canmore market, for most of last year, increased 4.4 per cent year over year to $1,670,000. The median price of a Canmore condo increased 9.8 per cent to $765,000. Total sales were down 3.6 per cent year over year in the region.
“Canmore continues to settle back to pre-pandemic sales volumes and price growth. Inventory levels have gradually risen in 2024 yet we are still far below historical averages,” notes Brad Hawker, associate broker, Royal LePage Solutions. “This has helped to keep prices moving upward. Last year, the number of days listings are sitting on the market increased modestly.”
He mentions that, in the Canmore market, with recent global geopolitical unrest, the Canadian economy, an upcoming Canadian election and the election of a new American president have contributed to slightly more balanced conditions and consumers have adopted a wait-and-see approach.
Much like some residential areas of Calgary, Canmore’s high-end real estate reputation also makes affordability a market factor. “Affordability has been a Canmore issue for 20-plus years,” admits Richard Greaves, with 17 years of expertise and as broker/owner of Re/Max Alpine Realty, specializing in the Canmore, Banff and Bow Valley recreational property market.
“The recent drops in interest rates have again stimulated Canmore demand but, like many other markets, we continue to have a lack of inventory for buyers to choose from. And that lack of inventory has kept some buyers on the sidelines. If our Spring market is strong, we’ll start to see properties selling in multiple offer situations, if our inventory doesn’t improve.”
While the ‘high-end real estate’ reputation is often exaggerated, for most recreational property buyers in Canmore as well as the Shuswap, Osoyoos, Banff and Sylvan Lake, lowered mortgage rates are not as much of an issue as they may be in urban Calgary. Many buyers pay cash and are not overly-sensitive to interest rates. “By and large, purchasers in this market are more than willing to wait for the right property to come along, regardless of mortgage rates,” Hawker says.
“The biggest factor affecting our market is the lack of inventory, both for second home buyers and local buyers,” Greaves points out. “The Three Sisters development should finally start breaking ground this year, bringing some much-needed inventory to our market. But the lack of inventory has put upward pressure on pricing, and I see that continuing through 2025.”
Despite the fresh country air, spectacular views, relaxing good times and fun, the important reality check are the pros and cons and cautions about recreational properties.
Unlike conventional real estate, and more like fine wines, the investment value of recreational properties takes time. They can also be a money management mine field with aspects like capital gains, inheritance and other tricky tax matters to consider.
“While it’s nice to think of a recreational property as an investment with the added benefit of being a relaxing, second home physical space to enjoy and create memories with the family,” notes Calgary’s Tricia Leadbeater, an experienced portfolio manager and investment advisor with Richardson Wealth. “But in addition to the usual risks which apply to all real estate investing, such as future desirability and value in a resale market, there are a few cautions and considerations specific to recreational property second homes.
“There is no guarantee that the recreational property will continue to increase at the rates that it has over the post-pandemic years. There was an extraordinary rate of increase in property values in areas that were desirable to work-from-home, that may not grow at the same rate in the future. When considering a second home as an investment, it is wise to factor in carrying costs. Annual expenses like property taxes, utilities, insurance and maintenance, in addition to the up-front purchase price.”
An often overlooked carrying cost expense is home insurance which may be high, since many popular areas like Canmore and the Shuswap are subject to extreme weather events. Forest fires in a recreational property area can make insurance coverage much more expensive than with a city home, and the insurance may not fully cover replacement costs in the event of major damage.
Another important recreational-property-as-investment expense to consider is the cost of trades and materials for major repairs, renovations or construction. “It is more expensive and time consuming than in the city because there are fewer available trades (and) increased costs of transporting materials to smaller population centres,” she says.
And taxes! “You may be able to declare your cabin as your primary residence during certain years and claim the ‘primary residence exemption’ to reduce or avoid capital gains taxes when it sells. Caution. to claim a recreational property as a primary residence, there must be a formal declaration that the property was ordinarily inhabited during the years it is declared on a tax return. Capital gains must still be paid on the increase in the property value from when it was purchased to the year it started to be claimed as a primary residence, but it can be an effective way to avoid some capital gains taxes at sale or death.
“Another way to reduce capital gains tax is to maintain careful records on what is spent on the recreational property home improvements. Renovations that improve the property value can be used to increase your cost base, reducing the capital gain when it is sold.”
ReMax’s Richard Greaves explains that there are actually two distinct Canmore markets when it comes to recreational property investments. “Those that invest in the relaxation, lifestyle enjoyment that Canmore offers. They value the accessibility to the outdoors and the mountains, while being an hour away from Calgary.
“The other market are investors who buy properties which are zoned for Airbnb and Vrbo type rental use. The popularity and prices of these units have skyrocketed over the last five years, and the owners are seeing very good ROI from the short term rental market.”
