Hot Spot Spotting: How to find a rec property that is also a sound investment
Plus: A look at five "Hot Spots"
Apr 1, 2013
by Geoffrey Morgan
When most people buy a vacation property they’re thinking of it not primarily as an investment, but as a quality-of-life purchase. They want a place to take the family and friends, relax and enjoy the good life. But can you really have all that and a good investment, too?
Illustration Alain Pilon
Yes, you can, if you do a little digging into the real estate markets you’re looking at and if you know the difference between primary residential markets and vacation markets. “Recreational property is a very tricky market to understand,” says David Dale-Johnson, an executive professor of real estate economics and finance at the University of Alberta. It is more volatile than primary residential properties, he says, because vacation properties are luxury goods and a smaller proportion of the population is able to buy into
As a result, recreational buyers shouldn’t use the same tools they would to evaluate the market for their primary residence. Dale-Johnson says data from the multiple-listing service (MLS) tells a buyer nothing about the mix of housing stock sold over a given period and should be treated with caution, “especially in recreational real estate.” Don Campbell, president of the Real Estate Investment Network, agrees. “The average price means a whole lot of nothing when it comes to recreational property.”
Instead, Campbell says, “The biggest impact, both positive and negative, on recreational real estate comes from the closest large urban centre.” Property values in Sylvan Lake, therefore, are driven by the economies of Calgary and Edmonton, while home prices in Palm Springs are determined by the strength of the Los Angeles economy. If you see GDP growth in a larger centre, or steady population and average income growth, then you can expect the nearby vacation-property markets to follow suit.
When it comes to recreational real estate, most people tend to stick with what they know, be it the lake their friends have a place at or the mountain resort they’ve heard so much about. But while there’s certainly more risk, there’s also more reward available to those who are willing to take the road less traveled to their cottage, cabin or villa. Here’s our best guess at where the next hot spots might be.
Gleniffer Lake Alberta
One of Alberta’s latest rec-property hot spots is also one of the newest communities in the province. Gleniffer Lake was created in 1983 when the Dickson Dam was built to manage the flow of the Red Deer River. Much like nearby Sylvan Lake, Gleniffer Lake is equidistant between Calgary and Edmonton. Unlike Sylvan Lake, where three-bedroom properties sell for over $800,000, a comparable property in Gleniffer Lake costs about $380,000.
All roads south from Fernie, B.C. through the Flathead River Valley lead to Montana’s favourite ski town, Kalispell. Ski-in, ski-out condos on Whitefish Mountain sell for as little as $200,000, and the ski hill isn’t the only tourist attraction in the area. Glacier National Park, Whitefish Lake, Flathead Lake and the Flathead National Forest surround Kalispell, which helps make it a year-round destination.
Vernon British Columbia
Recreational property buyers from Alberta have been heading to Kelowna for years in search of vacation homes. As a result, prices for waterfront condominiums and resort properties there have appreciated to upwards of $1.3 million. But further north in the Okanagan valley, property prices in Vernon are still around $400,000. And with quick access to both Mara Lake and Silver Star ski resort, Albertans already account for 14 per cent of the buyers in the local market.
For Albertans looking to invest in property a bit farther from home, Melfort, Saskatchewan, has become an increasingly popular destination for recreational property buyers from Saskatoon. Saskatoon’s mining industry has helped the province achieve the lowest unemployment rate in the country. Melfort is in Saskatchewan’s lake country and waterfront properties there sell for upwards of $450,000.
Bright Sand Lake Saskatchewan
Bright Sand is a little-known gem about an hour’s drive northeast from Lloydminster, and southeast from Cold Lake, two areas which are benefiting from increasing oil and gas activity. It’s also three hours from Saskatoon and Edmonton, which helps drive the area’s real estate values up. Lots in the area sell for roughly $60,000 but some developed properties on the lake now fetch upwards of $300,000.
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