It’s that time of year again. The 2020 BC Property Assessments arrived in the mail earlier this month. If you have not received your latest property tax assessment, you can also get access here.

Homes generally sell above and sometimes well above the assessed value approximately 80% of the time. This year will be no exception as the values on most Metro Vancouver homes and condos have gone down anywhere from 6-15% in 2020.

It’s important to note that BC property assessed value has little correlation to the market value of a property. It’s simply a very conservative estimate, a snapshot in time if you will, of what your home was worth, based on sales, as of July 1, 2019 – which wasn’t the most active month.

Furthermore, the assessors do not look at the interior of the home or the condo. For example, two 30-year old condos, same floor side by side with the same square footage. Condo 1 has just undergone an $80,000 renovation and the condo 2 is in its original state. Both condo 1 and condo 2 will be tax assessed at the exact same amount, yet, if one was to sell, condo 1 would sell for $80,000 more than condo 2.

What does this decline in BC Assessments mean for property taxes?

Since BC Assessments have come out, we’ve heard many property owners “Oh, my assessment went down 11% this year. That’s great, my property taxes are going to go down 11%.” Unfortunately, the reality is, that it’s not the case.

The reason property taxes won’t necessarily decline in tandem with property assessments is that, regardless of what’s happening with local real estate values, every municipality still needs to raise enough revenue to fund its operations.

For Vancouver, this year’s $1.6 billion operating budget was approved last month by council, and property taxes are, by far, the single largest revenue source for the city. (About half of your property tax bill goes to the city, while the rest funds regional and provincial services.)

Vancouver’s 2020 budget draft presented a property tax increase of 8.2% but passed a 7% increase last month. So even if your BC Assessment has dropped by $100,000 from last year, what matters is how it changed relative to other properties in your municipality. As a point of reference, a typical detached house in Vancouver saw an 11% decrease this year while a typical condo fell by 7%.

If your home’s value decreases more than most other properties in your jurisdiction, you might be able to expect less of a property tax hike. But if your property held its value more than others, you might be able to expect an even larger tax increase, relatively speaking, this year.

What does the property tax assessment drop mean for mortgage renewals?

Many of my clients are worried that they may not be able to renew their mortgage now that their assessed property value has fallen. As I have mentioned before, assessed values have little resemblance to the market value therefore, in most cases renewal shouldn’t be an issue.

Generally speaking, when renewing a mortgage with the same lender, so long as your credit standing has not substantially deteriorated, requalification isn’t required. Therefore, if you’re staying with your current lender, this is typically a non-issue and renewing is straightforward for the more than 99% of Canadian homeowners whose mortgage is in good standing.

As a matter of practice, as long as your mortgage payments are being made on time, the lender typically won’t undertake a new property valuation at renewal. Declining market values could, however, impact those looking to refinance their mortgage, either to access additional funds or switch lenders.

If your renewal is coming up and your property has fallen in value by 10% or 20%, it doesn’t mean anything!

To get an accurate value on your home for mortgage financing, litigation or other matters such as spousal buyout or divorce or to appeal the value of your assessment, I would highly recommend seeking a licensed appraiser that is a member of the Appraisal Institute of Canada with CRA or AACI designation.

Do contact us for a licensed appraiser recommendation. We’d be more than happy to assist.