Investment SeasonCottage country may not be the most recognisable term in the world, but to anyone who’s spent enough time in parts of North America it’s as familiar as “ski country” or simply “the beach.” Cottaging (not that kind of cottaging) goes back decades, and summons images of tents and rustic log cabins with wood burning stoves and all manner of biting insect. We won’t talk about restroom facilities.

The area around the Canada-United States border is a hotbed of seasonal recreation and has a long history in the region. The Adirondack Mountains in the US (in north-eastern New York) lend their name to a state park teeming with lakes — Lake Placid among them — around which a booming tourist industry evolved. Better known is the Adirondack chair, a uniquely local piece of furniture designed for outdoor use, now synonymous with the cottaging lifestyle. Similarly, the Muskoka chair from central Ontario is a tip of the hat to one of the world’s great vacation home destinations.

The Muskoka district spans just around 2,500 square kilometres approximately two hours from Toronto and is home to over 1,500 individual and sometimes interconnected lakes. The lakefront properties that dot the major lakes, Muskoka, Joseph and Rousseau, were once colloquially known as Millionaires Row and have been popular among the glitterati for decades. Suffice it to say these are not rustic cabins without plumbing. And according to sales representative Richard Scully of Harvey Kalles Real Estate Ltd., Brokerage, the area has landed on the investment radar.

“It’s a gorgeous, gorgeous area,” Scully begins by way of explaining Muskoka’s fundamental appeal over New York or the Kawarthas, another popular summer destination. “The drive time from Toronto is under two hours. Going north the whole dynamic of the topography changes. Go east and you need three or four hours before you’re really out there. The Muskokas is just granite and trees and big lakes and clean water, which has flourished.” The area isn’t subject to the harsher conditions of something like Georgian Bay (on massive Lake Huron) and lacks the larger, distracting watercraft. That lifestyle is keeping Muskoka’s market healthy. “Our high watermark for pricing and demand was 2007. In 2008 sales dropped 30 or 40 percent, and now we’re back to about half that and rising. Go to Georgian Bay, Haliburton or the Kawarthas … those areas have been devastated.” It’s the cream of the crop and its resilient market is evidence of that.

The governing councils have put a lot of effort into maintaining the area’s water and land quality, keeping building to a minimum and keeping the quality of life high. New supply and the number of prime lots available are extremely limited (another reason for rising prices) and though developers are always on the lookout for a prime lot, Muskoka remains largely private homes.

Muskoka used to be something of a hidden gem; residents in the immediate area knew all about it, but that’s changing. “We’re seeing more and more foreign investors now. If you go back about 10 years when the Canadian dollar was as a low as 70 cents to the US dollar buyers were getting $1,700 or $1,800 for every thousand. It was a good opportunity for Americans… But we’re seeing a lot more of an influx out of Germany and Asia, especially the Hong Kong area,” says Scully of the current make up of buyers. He chalks it up to greater numbers of first and second-generation residents now familiar with the country and the lifestyle, and who are looking to take advantage of it, as well as find stores for personal wealth. Is the perception of Canada as a safe haven part of the equation?

“Yes, I think it’s seen as a safe haven. It’s a safe country and the banks are very regulated. We only have five major banks and a number of credit unions,” Scully begins. “I can’t really speak to the status of banks or governments in other countries, but the regulations here are incredibly tough … We’re stable, with a good economy, strong natural resources and so on.”

Muskoka’s infrastructure is such that vacationers can navigate the entire area from their dock, and the region, while being tranquil, is far from isolated. From the water residents can boat right up to one of five different golf courses, go to the grocery store, the liquor store, do some shopping, go to a restaurant, and on and on. Potential investors should be prepared for steep prices: Entry level is CA$600,000 up to $1.2 million. Classic Muskoka Lake properties can run to $16 million, but smaller lakes provide an opportunity to enter the market for those with lower budgets. Either way, “If you have that kind of money, often [you] don’t know where to put it. Do you put it in the stock market? If you’re a little bit worried you don’t. You don’t put in the bank where you’re not making any money. No one’s even sure about gold any more. Land has always had a pretty good edge. Sales over $2 million have shot through the roof,” Scully notes.

Rental returns or capital appreciation are often the end goal for investors, and Scully admits that the majority of Muskoka owners are end-users. Rental properties do exist, and there are services that help source tenants. But, “If you add them all up there are probably about 100 properties that get rented each year. That’s a small percentage on 5,000 or 6,000 houses on the three big lakes alone,” Scully explains. On top of that, owners tend to lease homes for the entire season, and on substantial properties that can run as high as $200,000 for the 10-week summer. With lifestyle properties gaining traction among investors, Muskoka looks primed for a renaissance it never really needed.