As of this July, house prices will have fallen for the fourth straight month. In June, the average house price decreased 2% from this time last year. In addition, home sales were down 5.6% from May. The cause of these drops, as we know, are less to do with supply and more to do with interest rate increases, which are not over yet.&nbsp;The number of transactions in the past 12 months has decreased 24% Canada-wide and 42% for the Toronto area. Forget the pandemic, these decreases in sales are largely to do with increased interest rates influencing homebuyers and encouraging them to take a more cautious approach to the market. Those looking to buy a primary place of residence will be affected one way or another by changing interest rates, but what about secondary residences like a cottage? Would buying a cottage be a good idea right now given the lower entry price point?Despite rising interest rates and decreased sales, house prices in places like Toronto, Hamilton, and Vancouver are not affordable and still continue to rise, just at a slower rate. For example, despite recent moderation, Toronto’s property prices fell 4% month over month but increased 5% year over year.&nbsp;With this in mind, how can a cottage fit into the equation? Aside from renting to combat the housing affordability crisis, many millennials have begun considering cottages. Cottages provide many of the perks of owning a home with a rural twist. You don’t have to love the cottage lifestyle to go forward with this. Point 2 Homes suggests that people can bridge the gap to homeownership by allowing owners to build equity before moving back into the city. You’re in the game and participating in the market. They also point out that, for example, $250,000 will get you nowhere in the city, but will stretch much farther in cottage country. Of course, location matters.&nbsp;While places like Parry Sound, Gananoque, and Thunder Bay offer reasonably low prices, Muskoka, Georgian Bay, and Prince Edward County have prices that too closely resemble those of houses in the city. For example, while Thunder Bay’s cottages sell for an average of $289,000, Southern Georgian Bay cottages sell for an average of $825,000. Those located on the water are also more expensive. The idea in this strategy though, is to be in the market so that should there be a significant change in sentiment you’re not left behind.There are some changes in the cottage market to be aware of. Blog TO cites broker Chris Winney who asserts that due to the pandemic where people were not able to go on regular vacations outside of the country, buyers have been turning towards cottages at an alarming rate. He also points out that with people choosing to work from home with less of a reason to remain close to the city, the pandemic has driven more people into rural areas which has affected cottage country prices as well. Exodus from major cities has driven up prices of cottages, as the supply cannot keep up with the demand. (While we don’t subscribe to the supply argument for curing the over all market, here is a case where we do believe it is the main driver of prices.) So, with affordability of cottages being its number one attraction for 39% of buyers according to RE/MAX Canada, perhaps it would be worthwhile to consider the other attractors, such as lifestyle, water access, access to the outdoors, and low-density neighbourhoods, all which measured to be just as important for buyers as affordability. But again, the main reason that we are talking about this strategy is that it allows more people to gain access to the real estate market and ensure that they are participating. A market and investment hedge.There is a saying that was made famous by baseball-playing philosopher Yogi Berra; “It is hard to make predictions, especially about the future”.&nbsp;When will the market turn? It’s anyone’s guess. So, it may or may not be a good idea to be patient with the housing market of your own area and stay on the sidelines.&nbsp;However, buying a cottage as a primary place of residence or at least an entry into the market, could really help you bridge the gap to home ownership in the urban housing market. It seems to depend on what an individual buyer is looking for, and if the lifestyle attractors are worth the price tag, but for the right deal it could be the answer.&nbsp;

COULD BUYING A COTTAGE BE THE WAY TO BRIDGE INTO THE HOUSING MARKET RIGHT NOW? - REAL ESTATE IDEAS

RIFO examines the opportunity for first time buyers to bridge into the hot Canadian real estate market by buying a cottage property in Ontario in 2022


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