BC Assessments and Property Taxes
By now most everyone should have received their BC assessment in the mail, and you have likely noticed a significant increase in your homes assessed value. Property values increased by an average of 22% across the province1, and Vancouver Island property values increased by 28%.2 More specifically, the Nanaimo market saw an average increase of 34%.3 It is important to keep in mind that BC Assessments are not always indicative of the market value of your home. One of Gillette & Associates recently sold listings, 7390 Sunbury Road, was listed for $3,380,000. This was one of our last listings to be sold in 2021 and, at the time that it was listed, BC Assessment had a value of $2,450,000.
One factor in the difference in the assessed value and sale price of a property is that BC Assessment determines the assessed value based on the market value on July 1st of the previous year (2022 assessment based on July 1st, 2021, market). When you look at that market statistics you can see the average sales price for a single-family home in Nanaimo for the period of July 1st, 2020, to July 1st, 2021, increased from $573,123 to $756,998 (32.08% increase). This means that the assessment you received isn’t going to stay up to date with the market and does not take into consideration other market factors such as changes in inventory, and potential interest rate changes that shift the market by affecting mortgage qualifying amounts.
BC Assessments have been a cause of confusion for many homeowners who may have been operating under the assumption that this value was directly tied to how much they could sell their house for. Take this example I found a few months ago. This homeowner tried to increase his assessment by over a million dollars! The only thing that this would do for the homeowner is significantly increase the amount of property taxes that they would have to pay. This is because property taxes are calculated using a combination of your BC Assessed value and your municipalities mill rate. The mill rate is a dollar value per $1,000 of value in your home and is adjusted annually by municipalities. Here is an example of how this is calculated. This example shows the amount of property taxes per $100,000 in the City of Nanaimo.
The mill rate is determined by municipalities by May 15th every year, and the rate is determined based on the municipalities annual budgets and funding. Property taxes are used to fund police and fire protection, schools, hospitals and other community services. The mill rate being determined by municipalities every year means that a 30% assessment increase doesn’t always mean that your property taxes increase by 30%. In 2018 the mill rate for the City of Nanaimo was $7.2788 and 2019 saw a decrease to $6.9005.4 At that time, a 30% increase in your assessed value would still increase your property taxes based on the value of your home, but not as much as if the mill rate had stayed the same.
The government has also been looking at different ways to generate revenue through homeowners. The most recent idea that was introduced was implementing a tax on homes assessed over a million dollars. The tax rate would range from 0.2%-1% depending on the value of the home. This would also be a tax that is deferred to when the home is sold, so this would not be an annual income generator for the government. For easy numbers, if you had a home valued at a million dollars and you sold it after living there for 10 years, you would be taxed $20,000 from the proceeds of your sale (1,000,000 x 0.2% x 10). This tax is not set in stone and could be changed, or not even implemented. Gillette & Associates keeps a close eye on any speculations like this to make sure that our strategies are in line with market factors that could affect the value of a client’s home and, in the case of buying real estate for our clients, make sure that we take these speculations into consideration to make sure that everything that we do is well thought out and that there are proper plans in place. Having bought and sold as many properties as we have over our 40 years of combined Nanaimo real estate experience, we are able to predict how these changes in the real estate industry will affect sale prices, and a proven track record of being able to adapt to changes in the market!