2021 January BC Assessments are released - what does this mean?
On January 4, 2021 BC Assessment announced 2021 assessments with various increases and decreases from 2020 to reflect market estimated value as of July 1, 2020 and Physical Condition and Permitted Use as of October 31, 2020.
The common valuation date ensures there is an equitable property assessment base for property taxation as the main purpose for the property assessments.
The media has been reporting of Metro Vancouver properties up as much as 10% which is true but does spark concern when the past year to current date we are in pandemic conditions. The range as reported from BC Assessment is actually 0-10%. Let's have a closer look at the changes, how valuations are derived and what this means overall.
City of Vancouver had typical changes of: 10% for single-family homes 3% for strata residential homes
average of 6.5% (Note: this is not a true average)
This increase does follow HPI values over prior year with a 5.0% increase - see live interactive statistics for HPI price here - some variance in the Vancouver market should be noted that new strata developments are on the steep rise affecting direct comparisons
Here is the official news release and geographical area stats - Vancouver Lower Mainland 2021 Property Assessments
A common question we get asked is 'Why is my property assessment 'higher/lower' than expected and how does it affect me?' This is an excellent question and has a multi level answer depending on the perspective of the question.
The simple answer is the valuation is an estimated fair market value of your property as of July 1 prior year. The assessment can give you a rough estimate on value but since it is assessed in the past and does not account for market movement to current date or specific recent comparables in the immediate area, there will be discrepancies on true value.
The most accurate value of your property would be what someone would pay for it and to value a property according to this principle, as close as possible without someone actually buying it, would be to do a property assessment for the immediate area using comparables, cost approach, latent value, and / or income values within one month prior. True value is what a willing and able buyer and seller agree on and perform on a transaction.
The other answer to this question and the main reason of BC assessment valuations would be tax revenue related. The government needs a way to assess values to tax on property and receive funds for operations; roads, hospitals, schools, etc. Overall assessment value for all properties in a municipality along with the operating budget provides a percentage rate that will be applied for each property resulting in the tax payable for the property owner. The increase or decrease in assessments overall does not necessarily mean higher or lower amounts for property taxes, since the municipal operating budget may not increase as much in ratio, the assessment tax rate may be lower or higher depending on City operational budget requirements. Here are the tax rates over the last years for the City of Vancouver:
As a quick comparable calculation based on Vancouver HPI pricing for July 2019 and July 2020 from this Interactive Graph for property tax payable to see the actual difference in property tax payable amounts: July 2019 ($1,166,600/$1000) * $2.56116 = $2987.85
July 2020 ($1,225,100/$1000) * $2.92568 = $3584.25 Vancouver HPI price increased by 5% while property tax payable increased at 19.96% (this will vary depending on your assessment amounts and percentage increases but this is an example on general HPI price average). As the City of Vancouver budgets are increasing, the increases would be in line with the funds the City needs to run.
The property tax revenues go to very good use and provide our cities with excellent services and that is some of what drives the attractiveness for greater influx to Vancouver. The property tax revenues go to services such as: Schools Police, fire fighting, emergency rescue Recreation and Community Centres, Libraries, Parks Hospitals Translink Some other items worth noting regarding property taxes are:
The home owner grant that reduces the amount of property tax payable for your principal residence is now $1,525,000 or less
There is a tax deferment program with low interest rates:
Regular Program : 0.45% Families With Children Program : 2.45%
Financial Hardship Program : 2.45%
See the BC Government website for the qualifications and details to Defer Your Taxes. Some investors suggest to take advantage of this low interest rate if you qualify and invest at a higher rate, access to investment dollars!
Many property owners are concerned about the changes in the property assessment values and would like to appeal the value, mainly to lower property taxes payable. Here is a link to appeal information and the process, note the deadline for appealing a property assessment is February 1, 2021. While reducing property assessment amount can lower property taxes payable, it may have a negative impact when selling your property as buyers could see lower value than surrounding properties.
As a summary, the main purpose of BC Assessment valuations are for City tax revenue purposes and should not be used for valuation of current value of properties. This is hard for consumers as BC Assessments are the quickest and easiest accessible information to 'see' what a property is worth. Truth is, the valuation is not true value and misleading. We have encountered situations favorable and unfavorable for buyers and sellers:
Upmarket - sellers reacting their assessment is too low; buyers reacting assessments are right
Downmarket - sellers reacting their assessment is right on, buyers reacting the assessments are too high
How do we at Praedia mitigate these differences for successful transactions? We provide hard data facts that back current date valuations, data within the past 3 months is considered 'current market'. We provide an in depth analysis presented with our Praedia Market Valuation Analysis backing the valuation ranges we provide based on the three principles of real estate valuation approaches; comparable, income, and latent values. Would you like to have a current market valuation for your purposes of buying or selling with no obligation?
At Praedia Real Estate Group we pride ourselves on providing above and beyond real estate information to help with your decision making. Contact Us anytime for information or your questions - we're always happy to hear from you!