the rennie brief - property assessments (january 2020)

JANUARY 2020

the rennie brief

what you need to know: all about property assessments

• Each year, the assessed values of approximately 2 million properties throughout British Columbia are determined by BC Assessment. • Assessments are dated to July 1st of the previous year and rely on property information such as the size and age of a home, its condition, and other attributes including recent comparable sales prices. • Generally-speaking, assessed values do not directly reflect market values. • A property’s assessed value is one factor influencing its associated property tax bill; the other is how much additional tax revenue local governments need to generate.

down by 23% in the first six months of 2019 versus the same period in 2018, they were up by 37% on a year-over-year basis in 2019’s second half. This transition in the market saw prices increase marginally in the final six months of the year after declining during the first six months. Notably, this increase is not captured in the assessed values. (Conversely, if conditions in a market deteriorate in the six months between the “as of” assessment date and when assessments are made public, the values may skew high.) ASSESSED VALUES & PROPERTY TAXES As noted, assessed values are used by municipal governments (and others) to determine how much property tax an owner will owe over the course of the year. They are not the only factor used in the determination of taxes, however: the other determinant is the magnitude of the required revenue a municipal council approves as part of its budget for the coming year. Assessed values are utilized primarily to distribute the tax burden across properties by way of the mill rate, or the percentage of a property’s assessed value that is owed in taxes. The mill rate is not important in and of itself, as it is merely calculated so that when it is applied to the aggregate of all property values it generates the amount of tax revenue required by the local government. On a related note, a change in a property’s assessed value from one year to the next does not necessarily indicate whether the owner’s property tax bill will change by the same amount or even in the same direction. For example, the City of Vancouver has increased property taxes by 7% this year, meaning that, on average, property owners will see their annual tax bill increase by that amount—despite assessed values having generally declined over the most recent year. That said, if a property’s value decreased by less then the City-wide average, then its associated tax bill, all else being equal, will increase by more than 7%. Conversely, if a property’s assessment fell by more than the City-wide average it will see its associated tax bill rise by less than 7% (or, in the very extreme case, decline).

WHO ASSESSES PROPERTY VALUES? BC Assessment, a provincial crown corporation created in 1974, is tasked with assessing the value of all real property in British Columbia each year. The values are as of July 1st each year and are shared with property owners during the first week of the following year. WHY ARE PROPERTY VALUES ASSESSED? The primary purpose of generating property value assessments is to provide local and provincial taxing authorities with a means of determining how much each property owner will pay in property taxes each year. HOW ARE THE ASSESSMENTS GENERATED? Appraisers work on behalf of BC Assessment to generate a consistent set of property values by evaluating, among other things: the location of a home; the size of a home; lot size; the age of a home; other features that affect a home’s value (including views); and comparable sales prices. The information that is used to generate the assessments comes from a variety of sources. These include: building permits; land titles office; recent transactions; property owner-initiated updates; 3D-modelling of Vancouver’s downtown condos to determine views; requests sent to owners; property visits; and aerial/street-front imagery. ASSESSED VALUE VS MARKET VALUE Generally-speaking, while assessed values provide a reasonable way of comparing values among properties at a given point in time, they do not directly correspond to market values. This is true for a number of reasons, however most importantly assessed values are made public six months after their “as of” date; in other words, assessed values do not, at the time of publication, reflect changes in market conditions over the preceding six months. This is particularly germane as it relates to current assessments, as July 1st marked the inflection point for Metro Vancouver’s resale market in 2019: in contrast to sales counts having been

For further information please contact Ryan Berlin (rberlin@rennie.com) or Andrew Ramlo (aramlo@rennie.com). The information set out herein (the “Information”) is intended for informational purposes only. RAR & RMS has not verified the information and does not represent, warrant or guarantee the accuracy, correctness and completeness of the information. RAR & RMS does not assume any responsibility or liability of any kind in connection with the information and the recipient’s reliance upon the information. The recipient of the information should take steps as the recipient may deem necessary to verify the information prior to placing any reliance upon the information. The information may change any time without notice or obligation to the recipient from RAR & RMS.

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