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A cottage on a lake in Muskoka, the heart of cottage country in Ontario.Mark Blinch/The Globe and Mail

The prices of cottages and vacation homes in Ontario and Atlantic Canada will rise sharply this year before inflated values push more buyers out of the market, according to a new forecast from Royal LePage.

Since the COVID-19 pandemic started, popular summer vacation areas such as Ontario’s Muskoka region, the Kawartha Lakes and Prince Edward County have all seen home prices jump more than 30 per cent as homebuyers sought room for home offices and outdoor entertainment.

Demand for cottages continued strong in January and February, normally the slowest period for cabin and vacation home sales. At some of the popular lakes, buyers are only getting a half-hour to look at a property – a short period of time for those driving for hours to get to cottage country.

“Normally, you would have half a day if you wanted,” said Phil Soper, president of Royal LePage. “In a normal cottage country market, you don’t see people traipsing out to view frozen cottages.”

Across Ontario’s cottage country and other popular summertime areas, the aggregate home price is expected to climb 17 per cent to $547,207 in 2021, according to Royal’s forecast, just slightly lower than the first year of the pandemic when the aggregate house price rose 19 per cent over 2019.

Mr. Soper said a double-digit percentage increase is considered “aggressive price appreciation.” “This is far from normal,” he said, adding that he sees prices “moderating” in the latter half of the year owing in part to growing unaffordability.

In vacation and semi-rural areas in Atlantic Canada, the aggregate home price is expected to rise 17 per cent to $226,961. That is higher than the previous year, where the price rose 12 per cent over 2019.

In Quebec, the price is predicted to rise by 15 per cent to $291,993; in British Columbia by 13 per cent to $781,918; in Alberta, by 6 per cent to $942,881, and in the Prairies by 9 per cent to $260,862.

Royal LePage said the aggregate home price is based on a weighted model using median prices. It did not provide comparable prices for real estate across the entire province, including the cities.

With rapid price increases across all Ontario property, some realtors and economists are starting to say parts of the province are in a real estate bubble.

Mr. Soper disagreed with the term “asset bubble” as it implies a massive price correction eventually. Rather, Mr. Soper said the steep price increase over the winter is unsustainable in that the value of real estate is far outpacing wages. “You know that can’t last because the gap between people’s ability to pay and home prices is growing,” he said.

The Canadian Real Estate Association recently increased its sales and home price forecast after January and February’s high numbers. It is now predicting home sales to reach 702,000 units this year, up 27 per cent from last year, while the average selling price is set to hit $665,000, up 17 per cent from last year.

“The soonest I see any kind of market correction would be in 2022,” Mr. Soper said.

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