Assessments rise dramatically, and tax jumps could follow

The value of homes in Surrey and the surrounding region continues to rise, according to figures released by the B.C. Assessment Authority on Monday.

The authority took the unusual step of stating in early December that many assessed values would increase “notably more than average.” It said many property assessments, particularly of homes on lots, would rise by 15 to 25 per cent from the January, 2015 assessments. These significant jumps would take place throughout the Metro Vancouver area.

Assessed values are used for property taxation purposes, but are also widely used by realtors, home buyers and sellers and others wanting more information on what’s going on in the real estate market.

The authority wasn’t wrong about the jump in property values. A press release issued Monday shows that the assessed values (which are based on a hypothetical sale on July 1, 2015) have risen by between 10 and 17 per cent in Surrey, Delta and White Rock.

The “typical” assessed value for standalone homes has jumped by 17 per cent in South Delta, 16 per cent in Central Surrey, 14 per cent in White Rock, 12 per cent in East Surrey and North Delta and 10 per cent in North Surrey and South Surrey. There has been a much slower rise in assessed values for strata units, partially because of a generous supply.

Of course, there may be significant variables in those areas, as each home is unique and there are often specific factors in neighbourhoods which affect assessed values.

There is no question that there is an increasing demand for homes on lots, most of which are not “single family,” which is rapidly becoming a misnomer. Fewer new ones are being built as the value of land makes it difficult for many younger buyers to afford them. Cities are also encouraging higher densities in order to make transit service more viable.

In recent months, many Surrey homeowners have been approached by realtors who are in need of listings of standalone homes. There has been more demand than supply in many areas, and that has boosted prices and reduced inventory.

However, it’s highly unlikely that prices will keep rising indefinitely. While low interest rates make it possible to borrow large sums of money and have affordable mortgage payments, people paying those mortgages also need a steady income. The economy in the Lower Mainland is stable, but far from robust. Many homeowners are dependent on rent from tenants in one or more suites to make their mortgage payments, and can easily fall behind if the rent isn’t paid, or the suite is vacant.

Every rise in the real estate market comes to an end eventually. While a significant downturn in prices isn’t too likely, it is certainly possible that there will be a downturn sometime in the next few years.

The rise is assessments may also mean that a number of homeowners end up paying significantly higher taxes this year. While jumps in assessments are often accompanied by reductions in mill rates, to keep taxation fairly even, Surrey in particular is facing some large additional expenses. If council decides not to reduce the mill rate significantly, it could boost taxes substantially - simply by taking advantage of the jump in property values. Of course, the biggest share of the increases would be borne by those owning standalone homes, as their assessments have gone up the most.

It is also possible that TransLink, which draws a significant amount of revenue from property tax, will also take advantage of the jump in assessments and not reduce its mill rate substantially. This is even more likely after the referendum defeat of its proposal to boost the sales tax.

A small number of homeowners with properties worth more than $1.2 million (there are a lot of them in White Rock) will also lose all or part of their homeowner grants. The provincial government was paying the homeowner grant for properties worth $1.295 million or less in 2013 (significantly, an election year), but dropped that threshold to $1.1 million for 2014 and 2015. On Tuesday, Finance Minister Mike de Jong announced that the threshold would rise to $1.2 million for 2016 - still almost a million dollars lower than it was three years ago..