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Clarke Muskoka Realty

Construction, real estate market perpetually joined

The construction industry and real estate markets are so intertwined that when one sees outsized pressures and demands, the other often follows.

This is especially true of the current resale market. Property values have been soaring, in part due to the cost of building new or rebuilding.

The pandemic wreaked havoc on construction pricing. Lack of inventory, delays in transportation, and labour issues all drove costs skyward. And while things have improved somewhat, construction costs remain high.

“The costs to replace an older cottage compared to a few years ago have dramatically risen,” says Bob Clarke, the owner of Clarke Muskoka Construction and Bob Clarke Muskoka Realty. “Completely custom new home and cottage builds, like those we do, have also seen incredible cost increases, especially when factoring in high end finishes and fixtures.”

The costs to replace an older cottage compared to a few years ago have dramatically risen, as well as the costs to build a completely custom new build like those done by Clarke Muskoka Construction; especially when factoring in high end finishes and fixtures.

As a realtor and a builder, Bob clearly sees the way the two markets affect each other.

“Rising construction costs helped drive up the price of resale properties. At the same time, vacant land is almost non-existent – particularly on the Big Three lakes. So the cost of teardown cottages has really escalated.”

And while the rate of increase has moderated, property values won’t be subsiding anytime soon.

It’s not just the selling price and hard building costs – materials, labour, permits and taxes – that property buyers need to consider when purchasing a cottage or land to build on. Other factors come into play, explains Bob.

He points by way of example to a cottage property on Kahshe Lake that was listed for $1.45 million. It received seven offers and sold for $2.25 million.

“To build the place the new owners would like, they will have to tear down the existing cottage and buy the shore road allowance,” explains Bob. “Meaning they’re likely already spending over $2.5 million before even starting to build their dream cottage.”

This kind of cottage purchase isn’t just expensive, it’s complex. Navigating it effectively requires someone who knows the ins and outs of real estate, construction, and Muskoka in general.

A cottager in Muskoka for over 32 years, Bob has been buying, building, renovating, and selling properties since 1987.

He and his expert team help their clients navigate the complexities of zoning bylaws and the municipal permit process, which differs from one municipality to the next. They draw upon years of experience to help their clients understand essential topics like grandfathering, and restrictions on building height and lot coverage.

“These rules and regulations change constantly,” explains Bob. “We stay updated to ensure we provide our clients the very best advice on how to achieve the cottage property they really want.”

Rental market
Construction and real estate costs are also entangled with the cottage rental market.

In recent years, Muskoka has seen more and more cottages purchased as investment properties. But rising mortgage rates, increased renovation and maintenance costs, and higher taxes are impacting rental fees at the same time as rental demand is changing.

Though demand is still high in Muskoka, potential renters also have more choice than in previous years.

“There have been signs the rental market is softening in certain areas,” say Bob. “Where almost every single cottage was once rented out months in advance for the entire summer and even fall, now there are those that have yet to fully sell out for the summer even as late as May.”

That’s a sign that vacationers are weighing all their options before deciding where to stay. In a competitive rental market, it could also mean needing to reduce rates in the future – not ideal when you’ve paid a king’s ransom for your property.

“This will likely put some pressure on the market moving forward, as affordability of running these investment properties comes into question,” says Bob.

“Anyone who’s considering buying or building a cottage as a rental property should be sure to discuss their plans with us, to ensure we can help them find the right property at the right price.”


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