Second Home a goal for many Canadians

Second home a goal for many Canadians

There's an old saying: "May you live in interesting times."

"Interesting times" certainly describes Canada's recreation property market in the last 14 months. The economic crunch of late 2008, coupled by reports of high-profile developers stalling projects or going into receivership, raised the question as to whether last year would see the good times come to an end for the recreation property industry.

Many consumers had trouble differentiating between the real estate woes in the U.S. and the condition of the Canadian market, which remained considerably stronger, says Elton Ash, regional executive vice-president with Re/Max Western Canada.

Just over a year ago, "the bottom had fallen out of the economic world, starting in September (2008) with the Lehman Brothers collapse, and when it came to real estate, nationally there were zero transactions going on," he says.

"The news every day was negative, negative. I think we as a national psyche just said, 'We're not going to participate in this.'"

But unlike the States, where the real estate industry was hurt by skyrocketing mortgage defaults and bank collapses, Ash says, "Canada's banking system was the soundest in the world, and distressed mortgages weren't going up by any great extent. We like to own, we like equity, and we don't leverage ourselves a great deal. And that lends well to (buying) recreational property."

But, "the high dollar has hurt the Canadian recreation market a bit, because people are looking south rather than at home," Ash adds. "Nonetheless, the sense of legacy is still there for baby boomers, and recreation properties and second homes in Canada will remain a very sought-after goal."

Re/Max recently released its Housing Market Outlook for 2010, and while it doesn't deal specifically with recreation properties -that outlook arrives in the summer -it does paint a rosier picture for the Canadian scene than what might have been envisioned a year ago.

"The best way to define the report is that Canadians are confident, and our recovery is proving to bring about very balanced real estate market conditions nationally, and in every market," Ash says.

The era of the zero-down mortgage in Canada was ended by the federal government in 2008, says Gary Siegle, regional manager at Invis. "As of October 2008, we were no longer able to offer zero down and 40-year amortization, so now people must have five per cent down, at least," he says.

In Canada, there's a greater emphasis on credit scores for individuals looking to buy a second property, Siegle says.

"The credit requirement would have been one mitigating factor that didn't happen in the States," he says. "(Also,) lenders have become less willing to make exceptions, so we find people need to meet common-sense underwriting guidelines. People wanting a mortgage may have to show more documentation, answer more questions.

"Nonetheless, there's ample credit available, and people who are looking at buying a second property typically have a good financial situation already. We still have products where people can buy vacation and second homes with financing of up to 95 per cent."

Siegle's biggest piece of advice for those considering buying a recreation property in 2010: speak to a mortgage broker. "Get the information on what financing is available to you, so you can understand the choices," he says. For those looking to buy outside Canada, interest in Mexican properties remains high, says Martin Lautsch, Calgary based sales manager for La Bella Vita, a development in Puerto Penasco by the Sea of Cortez.

"Certainly there are people looking for value, though whether they're taking advantage of it now or waiting for when their situation improves a bit more is an unknown," he says. "We're focused 95 per cent on the Canadian market, and Western Canada specifically. There's some trepidation, I'm sure, but since late summer, inquiries have picked up and we're seeing good response to our marketing material.

"You can see things are on the upswing." Lautsch says there's a growing interest in properties in lesser-known locations. "Lots of people can't afford Acapulco and they're not interested in somewhere where there's half a million people," he says. "Puerto Penasco looks like some of those more-developed areas did 25 years ago."

Still, Lautsch is hesitant to lock into predictions for 2010.

"We certainly expect the level of sales to increase, but as to forecasting, in my opinion it's very hard to do with resort properties," he says. "We haven't been hit as hard up here, and the clientele we've dealt with are professionals and they're going into this with their eyes open."