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Sales in the Muskoka area have swelled by 22 per cent year over year, while listings have shrunk by 17 per cent.

Potential buyers may be hesitant about investing in the Toronto area real estate market but those jitters have not spread to the luxury cottage market; listings are down in Muskoka just as sales appear to be on an upswing.

Anita Latner of Anita Latner Realty Inc. says both commercial and recreational properties have drawn interest from overseas.

"The international real estate market has discovered our vanity market," says Ms. Latner.

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In the posh cottage area centred around Lake Muskoka, Lake Rosseau and Lake Joseph – dubbed the "big three" by local agents – investors are buying properties as much for an investment as a family retreat, says Ms. Latner.

Multiple offers are increasingly common in cottage country, she says, even as sales have softened in the city.

"Before all this energy came up from Toronto, sometimes you'd get more than one offer, but now it's much more common – especially under $2-million," she says.

Paul Crammond of Chestnut Park Real Estate Ltd. says sales in the broad area roughly from Orillia, Ont. to Parry Sound have swelled by 15 per cent for the year to mid-May compared with the same period in 2016. Listings, meanwhile, have shrunk by 10 per cent.

Focusing more narrowly on Muskoka, Lake of Bays, and the town of Port Carling, transactions have jumped 22 per cent so far this year compared with the same period in 2016, while listings have declined 17 per cent.

Sales also include a higher percentage of higher-priced properties, he points out. Looking at the broad area, the dollar volume of sales swelled 41 per cent for the year to mid-May compared with the same period in 2016.

"In that mix we're also seeing more expensive properties sell this year than last year."

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Mr. Crammond says there are several factors that may be contributing to the scarcity of listings this year.

His sense from talking to cottage owners is that many are hesitant to list because they are anticipating a more significant jump in prices.

For several years, the average price edged up by three or four per cent a year. In 2016, prices for recreational properties in the cottage area north of Toronto posted gains in the range of 10 to 13 per cent compared with the previous year. There's greater incentive to hang onto a cottage when it's rising in value, he says.

"If there's no financial emergency to sell, some people are having a bit of a wait-and-see attitude to see if we will have a Toronto-style market here with double-digit price increases."

Mr. Crammond cautions that the cottage market is relatively small compared with the big city so the numbers have to be viewed carefully. One very high-priced sale can push up the average for the entire lake, for example, and it's not accurate to suggest that nearby properties saw a similar gain.

Properties that have been languishing on the market for years have finally sold in 2017. One vacant lot that Mr. Crammond had listed on and off for seven years has finally found an owner. The price had gradually been cut over the years and the buyer had missed out on two properties last year.

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He knows of a listing belonging to another agent that was on the market for a few years, with a couple of price cuts over time. This year the property was relisted with an asking price in the $1.4-million range and the agent set an offer date. The cottage drew three bids and sold for more than it was listed for last year.

"I've got to believe that it's the low inventory," Mr. Crammond says of the sudden action.

Another reason that properties north of the city are in such demand seems to be that some Toronto-area sellers are cashing in and buying elsewhere. A couple that sells a home in North York for $1.5-million, for example, can potentially buy a house in Gravenhurst, Bracebridge or Huntsville in the $500,000 range.

"They've got an extra $1-million" without the traffic, congestion and expense of the city, he points out.

In recent weeks Ms. Latner has sold two cottages that drew competing bidders. One was listed for $1.295-million and sold above the asking price with three bids on offer night. Another in the same price range had no deadline for offers but still drew three bids and sold at a premium to the asking price.

Ms. Latner also has a "sea plane-friendly" Lake Muskoka cottage for sale with an asking price of $3.85-million. On a recent weekend, she had people streaming through the "open house" on both Saturday and Sunday.

"The weather was a bit dismal. I was surprised in the rain how many people came out."

Ms. Latner figures some visitors were dropping by out of curiosity but most seemed to be from the area. Holding an open house is a good way to create buzz, she says.

"Word of mouth is so important. You never know who's going to walk through that door."

Ms. Latner believes that the foreign buyers who are drawn to cottage life often spend at least part of the year in Canada. They intend to spend time at the cottage with their families but they are also betting the property will appreciate in value.

A marina just north of Gravenhurst sold to international investors, she says. The marina offers floating docks that cater to a lot of cottagers with island properties, she says. There's a dockside restaurant and the buyers are contemplating further development of the property, she adds.

"The more development along the waterfront, the more entertaining it becomes. Going out by boat makes for a lovely evening. Islanders really need that – docking for boats and also parking for their cars."

On the smaller Muskoka Lakes, where properties change hands for between $1-million and $1.5-million, Ms. Latner says, bidding wars are now common.

Though some sellers favour setting an offer date in an effort to stir up competition, Ms. Latner is not keen on the practice. She worries that people may feel pressed to pay more than they otherwise would.

"I'm not thrilled with that concept … it makes the market more buoyant and richer," she says. "If things inflate too quickly, I'm afraid of the bursting possibility."

She adds that "the downside of a bidding war is if no one bids" because that sometimes means the seller loses negotiating power.

It's also not a given that a hot market will remain hot, she adds.

"Just because we're getting bidding wars now does not mean that we're going to get them two months from now or three months from now. If everyone walks, you as a seller are now vulnerable."

Mr. Crammond has been receiving calls from Toronto agents and potential buyers who would like to head to Muskoka to see some properties.

"The challenge is rounding up enough places to meet their needs to put a tour together."

Mr. Crammond has seen more immigrants to Canada buying waterfront property – especially if they have children who have visited the cottages of their friends. But he hasn't seen an infusion of cash from overseas.

Now that the Toronto housing market has slowed down, however, he's wondering if more people in Muskoka and the surrounding areas will be encouraged to sell.

Sales in the Greater Toronto Area dropped 20 per cent in May compared with May of 2016 while new listings soared 49 per cent in the same period. The average price rose 15 per cent in May compared with the same month last year.

The trend in cottage country always lags Toronto, Mr. Crammond says, but he's not sure cottagers should be counting on a Toronto bounce for prices in their market.

"Cottages are a luxury. They're a discretionary purchase so they're appealing to a relatively small segment of the population." He believes people holding on for a run-up in prices may be too optimistic.

"Timing the market is virtually impossible to do – whether you're trying to buy at the trough or sell at the peak."

This elegant home was built to the needs of its seller, boasting a wine cellar, ensuites, spa and stained glass dome over the main hall. The property was listed for over six million dollars, and ended up selling for just under $5.9-million.
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