In the wake of the federal government’s Budget 2024 announcement, Ontario’s cottage country is witnessing a surge in property prices, notably affecting secondary homeowners, particularly those with cottages. The amendment in real estate involves raising the capital gains inclusion rate from 50 per cent to 66.7 per cent, effectively translating to a higher tax burden for individuals selling secondary properties after June 25, with 66.7 per cent of all capital gains above $250,000 being taxable.

This fiscal adjustment coincides with an already bustling spring season in Ontario’s cottage regions. Since January, benchmark home prices in 11 markets within the area have witnessed significant growth, with all but one market experiencing price hikes exceeding 6 per cent.

Remarkably, areas like Georgian Bay, Tiny, Lake of Bays, and Muskoka Lakes have seen benchmark prices soar by over 11 per cent since the beginning of the year. The substantial increase, surpassing $90,000 in some regions, outpaces the growth observed in major Canadian markets like Toronto and Vancouver.

However, despite the overall price surge, the dynamics of waterfront properties present an intriguing contrast. While the median price for all waterfront properties in the Lakelands has seen a modest increase since January, the year-over-year figures reveal a decline. Notably, in Lakelands Central and Lakelands North, the median prices have dropped, albeit with Lakelands West experiencing a significant increase due to limited inventory in real estate.

Moreover, there’s been a notable uptick in the inventory of waterfront real estate properties across various regions, with Lakelands North witnessing a remarkable 61 per cent increase in new listings year-over-year in April.

The connection between these market dynamics and the capital gains tax increase remains speculative, given the natural flux of the spring real estate season. Nevertheless, it’s evident that the revised tax policy might be intensifying the decision-making process for homeowners considering the fate of their secondary properties. Despite the government’s projection that only a minuscule percentage of Canadians with significant incomes will be affected by the inclusion rate hike, its ramifications are palpable in Ontario‘s cottage country real estate landscape.