While sales of cabins on local ski hills were showing signs of strength, bankers reviewing the deals some of his clients were trying to do weren’t having any of it.
A four-bedroom condo that would have fetched $300,000 not too long ago listed at $200,000. And another property, purchased for $585,000, sold for $430,000.
RBC lenders in Ontario, however, refused to countenance a financing deal their regional lending team approved – for a top-notch client – because the bank had backed away from ski hill properties, Pettit said.
“They thought it was a slam dunk,” he says. “It went back to Toronto and they said no, ‘We’re not doing anything on the ski hills right now.’”
And, if banks are cautious, buyers are equally so. They’re not only keeping tabs on discretionary spending and mulling options for properties they don’t need, they’re also shying away from properties that haven’t held their value.
A case in point is properties sold on a fractional ownership basis.
While developers championed fractional ownership as a means of owning vacation property during the boom – it was also a convenient way for them to boost revenues from properties, as the sum of the parts was generally greater than the whole – vacation properties sold on this basis haven’t fared well.
“When you take a look at the value and sales of fractional ownerships, they now tend to be less on an individual fractional ownership basis,” explains Mark Lester, founder and leader of the specialized assets group at Sotheby’s International Realty Canada. “The sum of the fractionals tends to be less than the whole.”
He points to some of the West Coast resorts that were sold on a fractional ownership basis, largely waterfront properties along the B.C. coast – Painted Boat on the Sunshine Coast, Poet’s Cove on Pender Island and others.
Owners now find themselves having to discount their shares in the property in order to achieve sales.
“The market has shifted, and people are no longer interested in buying the fractionals at a premium – in fact, the fractionals are discounted,” Lester says.
And of course, any discount in one share taints the rest.
“Once it’s developed and some of the shares are sold – the value’s diminished,” he says.
Where possible, developers with units left to sell are offering them on a whole-ownership basis, avoiding the breakup of properties which are now worth more in themselves than as fractional interests.
“Anybody who thought that they were going to do fractionals are certainly not going to do fractionals today,” Lester says. “The marketplace doesn’t want to break up units.”
What the market is willing to accept, however, are smaller units.
An interesting phenomenon Soper has noticed as condominium living has become more accepted in Canada’s urban centres is an equal willingness among vacation home buyers to opt for apartments in prime locations.
“It’s really come into its own in the last decade,” he says. “I think the concept of stand-alone, two acres on a lake, is going to become increasingly uncommon.”
While this makes acreage a solid option for investors seeking to cash in on site appreciation, it also means owners with land in prime vacation spots may be able to cash in on redevelopment opportunities.
Savvy cottage owners have long sought to find properties that have grandfathered entitlements, such as narrower setbacks and less stringent requirements for septic fields and wells. Some properties built before tight regulations came in offer advantages to renovators that never to be replicated by new properties.
Similarly, some properties offer developers advantages once hogged by the wealthy few.
“Our cities are getting bigger and the demand on waterfront properties that’s within a three-hour drive of our major urban centres is very high, so there’s just less available waterfront land,” Soper says. “It’s very wasteful that one family that visits a property half a dozen times over a six month period have acres of land, and their own wells and their own septic system. It’s not sharing the wealth very well.”
He foresees more development of the sort common in the Laurentians of Quebec and B.C.’s Southern Interior, where owners of old motels and campgrounds have sold to developers with visions of lakeside resorts at popular destinations. Buyers are typically able to purchase a unit, placing it in a rental program during the part of the year when they’re not using it.