The BC Property Assessment notices went out earlier this month, and property taxes in Vancouver are due Tuesday, February 2 (check dates for other municipalities on their websites).
Some people were a little (or a lot) shocked at the spike in values over the last year. Conversely, others were disappointed that their property assessment hadn’t gone up even more, given the recent sales in many Vancouver neighbourhoods and stories they have heard in the media.
So how does the assessment process work? How will it affect your property taxes? What happens if you can’t afford your taxes? And what can you do if you’re not happy with the assessment?
The assessment process
The assessment process is explained as follows, on the back of your assessment: “In most cases, the assessed value is an estimate of the market (most probable selling price) for your property had it been for sale on July 1, 2015. In addition, this value typically reflects the physical condition of your property as of October 31, 2015.”
Each year, local governments calculate the tax rate (or mill rate), by dividing the annual budget by the total assessed property values and multiplying that by 1,000. Vancouverites typically paid $3.54 per $1,000 of assessed home value for 2015. In 2014, it was $3.68 per $1,000.
Our property taxes help fund a broad range of local projects and services. Bike lanes, garbage and recycling, road maintenance, community centres, parks, safe drinking water, police, fire and emergency services are just a few examples.
How will the increase affect my property taxes?
An increase in your assessment does not necessarily mean a proportionate increase in your property taxes. Keep in mind that the increase should only significantly impact your tax bill if they are out of line with average increases in your neighbourhood.
If your increase was in line with most of your neighbours, your taxes may not increase at all, or will only increase slightly. (Every home in the area receives about the same % increase). If one property was assessed at much higher than all of their neighbours, their taxes would increase more. If one was assessed at significantly less, their property taxes would likely decrease.
Rest assured that even if your property value went up 28%, (a typical increase for detached houses in East Van, and one of the highest percentage changes from the previous year), your taxes do not rise proportionately.
The Home Owner Grant
The biggest impact for many people this year is that you may no longer qualify for the Home Owner Grant, the annual discount off your property taxes, which is now cut off at properties assessed over $1.2 million. If your property was assessed at under the $1.2 million mark, and you live in your home, then you will continue to qualify for the $570 homeowner grant. If your property was assessed at over $1.2M, then you lose $5 of the grant, for every $1,000, until it reaches $1.314M, at which point, you lose the grant completely.
What can I do if I can’t afford to pay my property taxes?
There are programs available for those who wish to defer their property taxes, should their bill become too onerous. The interest rate for those over 55, (or for widows and widowers of any age) is 0.85%.
There is also a less well known program for families with children, with an interest rate of 2.85%.
Does your assessment really match what you would be able to sell your house for?
Sometimes it does, but most of the time, it does not.
The actual property valuations are done in July of the previous year. So, depending on the movement of the market in the last half of the year, the real value of your home will probably have changed (and these days, usually be worth more).
There are other factors to consider besides a changing market. Things like interior renovations, which in most cases are not visible so are not taken into account by an assessor, but which your real estate agent would factor into the market value of your property.
And sometimes, there is just no rhyme or reason.
A typical example
Let’s look at a real example of a two-bedroom/two-bath condo in the West End. Two similar units of the same size and layout, the only difference being one is on the third floor of the building, and the other on the fourth floor.
The third-floor condo was purchased in 2007 for $649,000. Every year since then, their property assessment was $649,000. This unit then sold in 2014 for $550,000 and now their assessment is $550,000.
The fourth-floor condo was assessed at $545,000 in 2010 (which is what it was purchased for in 2008), but sold that year for $522,000. Every year since, it has been assessed at $522,000.
So in 2010, the third-floor condo was assessed at $649,000 (the purchase price from 2007), while the condo one floor above was assessed at $545,000 (the purchase price in 2008).
This might seem surprising, but it is not uncommon for condos, that their assessments remain at or near what they were purchased for. These assessments obviously do not reflect their true market value if they were to sell today.
What do I do if I’m not happy with my assessment?
If you believe your assessment is incorrect and want to file a Notice of Complaint (Appeal), the deadline to do so is Monday, February 1, 2016. You will need to file the appeal and a formal hearing with an independent Property Assessment Review Panel will take place between February 1 and March 15, 2016. You will need to provide evidence to support your claim and can find out more about the process here.
And finally, for those who were disappointed that their assessments weren’t higher, the true current market value of your home, is what someone is actually willing to pay for it and not what the BC Assessment says it’s “worth”.