Factors That Affect Cottage Demand

The overall economic environment is much more significant in determining households' short-term expenditure decisions.

In these days of limited nominal income growth and job insecurity, even baby boomers on tap to the inheritance pipeline have become cautious consumers. In this environment, cottages have and will remain a "luxury good". Finally, the preferences of households have changed. Increasingly, primary market research indicates that as a result of the recent real estate bust combined with a slow performing economy, households are not willing to ante up on mortgage debt and real estate. Baby boomer households, in particular, are looking at the opportunity costs of investment in real estate compared to expenditures on a number of other things (home improvements, swimming pools, travelling, etc.) and are increasingly deciding to opt out of large houses and multiple home ownership.

A combination of economics and social change, driven by economic factors, suggest that the demand for cottage properties will not be broadly based amongst the aging baby boomer set and that, as always, careful research should be undertaken by a potential buyer. Leveraging the purchase of a cottage should not be done on the assumption of substantial increases in value in excess of normal trends. If there are still disbelievers out there, they should take a drive up to "cottage country" on any weekend and count the number of "For Sale" signs.

Article by Mary McDonough

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