Lower property assessments set to raise Greater Vancouver taxes

Valuation day

With the first half of the year done, the number crunchers will be busy sorting the data for initial insights on the market with a view to figuring out where the second half will take us. With many first-half numbers not due out till September, what’s happened to date will also set the tone for the final push to the end of the year.

Part of that push will be the BC Assessment Authority’s work developing the 2020 assessment roll. The initial valuation date for the roll is July 1. On the residential side, at least in Greater Vancouver, the trend promises lower assessment values for residential properties.

Real Estate Board of Greater Vancouver statistics showed a cumulative decline in the benchmark price of 9% in June versus a year earlier, to $998,700. This marked the 13th straight monthly decline and the first time since June 2017 that the benchmark dipped below $1 million. (Indeed, it was the exact same as in June 2017.)

But the slowdown in sales could make it difficult for owners of more-expensive properties to get an accurate assessment of their properties’ worth, warns Paul Sullivan, a principal with appraisal firm Burgess, Cawley, Sullivan & Associates Ltd.

“[This past year] BC Assessment took the position that the fact there were very few sales did not support that there was a significant change in the market value,” he said last week. “There still has not been a sale in the city of Vancouver over $15 million and there are very, very, very few sales over $10 million.… To substantiate the market value of a home in British Columbia over $5 million is still extremely difficult.”

It’s not just top-end properties that are affected by the situation.

While values on more affordable properties have been more resilient, they’ve not only taken a hit in value but will end up having to shoulder the shortfall in revenue needed to run the city. A decrease in the value of the tax roll means the tax rate will have to increase to cover the city’s rising expenses – expenses boosted by other taxes such as the employer health tax, which became owing last month.

Affordability eases

The downturn in housing prices led RBC Economics to end June on an optimistic note with respect to housing affordability.

“Dreadful” affordability in Vancouver and Victoria means there’s potential for further price decreases in the two cities, but RBC says conditions are improving for buyers. In the first quarter of 2019, it took 82% of monthly household income to afford a home in Vancouver, down five percentage points from a year ago, while a detached home required 112%. Victoria residences require an average of 58.6% of a household’s income, with condos requiring just 38.3% – 2.5 percentage points below the national average of 41.8%.

RBC focuses on the resale market, but there are also signs of improvement on the new-home side.

Statistics Canada’s latest survey of new-housing prices in Vancouver, Victoria and Kelowna reports a decline in the cost, with a 1.5% drop in Victoria and a 1.3% drop in Vancouver in April versus a year ago.

Notwithstanding improved affordability, a Century 21 Canada spring survey of its agents indicated that nearly 70% of its clients across Canada are concerned with the state of real estate markets.

“Buyers are significantly more optimistic than sellers, with 57.7% of agents reporting their clients buying property are excited or calm and 28.8% concerned about prices or taxes,” it reported. “In contrast, 38.6% of sellers are excited or calm and 38.7% concerned about prices or taxes.”

Responses from B.C. were largely consistent with the national findings. The exception was vendors, which ranked second to those on the Prairies in terms of concern. In B.C., 78% of sellers worried that they would be unable to sell in a reasonable time at their desired price.