The government of BC has found a terrific new way for you to help out with provincial finances: Buy more stuff. It doesn’t matter what you buy, as long as you buy more of it and pay more taxes on many items. Oddly enough not everyone loves this plan.
Oh, and for you sneaky unpatriotic types that were thinking about driving across the border to do some shopping based on new tax loophole, it’s not going to work right now.
Yep, property tax assessments are out and the Vancouver Sun asks how did you do?
This year — unlike in January of 2009 when the system was turned on its ear by political interference — it’s fairly easy to figure out if you’ll win or lose when your tax bill comes out in July.
Let me illustrate with an example that, on the surface, looks scary: Say your assessment notice shows a 15-per-cent increase in the value of your home or business. What to do?
First, don’t panic. Take a moment to read this column, check our website and figure out what this really means.
You’ll find a 15-per-cent increase is no big deal if your home is in New Denver, Kitimat or Clearwater, or your business is in Peachland, Sparwood or Smithers. Because in these places the average assessment — not just yours — is up about 15 per cent. So the impact will be nil. Any hit on your tax bill in July will be due solely to increased municipal spending.
Phew! But it’s a different story if you own property in a major urban center.
However, if this hypothetical 15-per-cent increase is for property in most urban centres — almost all of the Lower Mainland, the Capital Region or the Okanagan — then now might be a good time to panic. Because the average in these places hovers just a few points above or below zero. And if you have a significantly higher-than-average change in value, you get a bigger tax bill.
It’s how the change in your assessed value compares to the average for other properties in your community — not the absolute value of your assessment — that matters to your tax bill.
Well, I guess we’ll just have to hope that Vancouver City Council doesn’t want to raise any more tax money in the near future. You can check the assessment online here if you haven’t received any mail yet.
UPDATE: Don and Larry point out that the REBGV stats package PDF for December is now available online.
Well, this was completely unexpected. Just like the country and the province, lower mainland cities are looking at deficits and budget shortfalls. It’s a total shocker, just like recent problems with the Canadian economy. Vancouver is looking at ways to save money and hasn’t ruled out raising property tax rates.
So what do you think it will be – service cuts, property tax increases or both?
During the boom we had plenty of money coming in to city coffers thanks to all the new construction. Unfortunately we were building condos, which pay lower taxes and use more city services than commercial property. Businesses have been complaining for years about the disproportionate tax load they bear, does anyone think residential property tax will not be going up in the next couple of years?
This column in the Financial Post argues that you should BUY NOW because the HST is coming and will drive prices up.
Economist Benjamin Tal, of CIBC World Markets, predicts the tax will have an impact on housing sales. “It’s not like something you can brush under the carpet,” says Mr. Tal. “There will be reduced demand.” He predicts the industry will build more houses without all the finishings. That will leave the consumer to do work on the black market with contractors to avoid the HST. That’s what happened in the Maritimes where the HST has been in play for years, said Mr. Tal.
“This will give a boost to the under-the-table transactions. Is that an optimum thing?” says Mr. Tal.
It’s no wonder British Columbia’s housing industry is fighting the HST tooth and nail. It’s not interested in the Ontario compromise of an exemption on the first $400,000 of a home. B.C.
will provide a $20,000 tax break on the first $400,000 of a purchase, the amount being lower because the province has a 7% sales tax.
“There is no single family home here you can buy at that price,” says Peter Simpson, chief executive of the Greater Vancouver Home Builders’ Association.
Could higher taxes lead to higher demand and higher prices? If only they had the foresight to enact this policy in Las Vegas they could have prevented house prices from dropping in half!
So it’s official. That silence coming from the Homeowners Protection Office regarding leaky condo loans was the BC Government killing the leaky condo loan program. The good news is that you can get a really good rate on a hotel room in Vancouver since business travelers and other tourist visits have dropped right off. The new hotel visitor in Vancouver is the local family on a ‘Stay-cation’.
But Hey! Next year’s going to be more economically awesome than this year! At least according to this oddly written forecasting article in the Province. And even more good news: The extra money you pay for the HST is going to help bring down the deficit! The $1.6 Billion transition payment from Ottawa is going to help ‘bring this years deficit down’… The deficit that was going to be “$495 Million maximum”… From the government that promised to not implement the HST, or run a deficit for that matter.
Enjoy your Stay-cation!
Gordon Campbell has pledged to freeze BC property tax assessments at their 2007 level to ‘help people cope with turbulence in property values’. I’m trying to figure out the motivation for this move, perhaps to people that don’t understand property tax it seems like a relief? Our property tax system is not set up like California, where property tax is dependent on the assessed value. The crashing California real estate market has meant less money flowing into government coffers, leaving cities scrambling to make their budgets work.
In Vancouver your property tax assessment only matters in its relation to your neighbors. Every house price in Vancouver could drop across the board by 50% and the property tax paid by each owner would remain the same. This protects city tax income, but can be tougher on tax payers.
Tax assessments in Vancouver are done in July, which coincidentally was very close to our market peak. Freezing assessments at their 2007 value may help to make it appear house prices haven’t fallen as far as they have if the 2008 assessments are never made public. I don’t believe this is a motivating factor though, since the REBGV benchmark price and average sales price data still paints a more complete picture.
Vision Vancouver mayoral candidate Gregor Robertson has proposed that Vancouver implement a speculator tax to deter condo speculation. In this case speculation is defined by the condo unit being left vacant rather than by flipping or simply taking on more debt than you can handle based on the hope of future gains.
Robertson justifies the need for this tax by referring to the BC Hydro grow-op study that found 18,000 vacant condos in Vancouver, which is equal to half the total number of condos in the Downtown Westend. This number is said not to include units that are part-time occupied as second homes or vacation properties, only units that use no electricity through the year.
The obvious difficulty comes in defining the criteria by which condos would be taxed at the business rate. Taxes on speculation are often based on ‘flipping’ rather than holding an empty condo. How do you determine if a condo truly is empty? Would there be penalties for ‘faking’ occupancy? What are your thoughts on this proposal, would it help or hurt the Vancouver housing market?
From todays Vancouver Province, higher assessments on some single family homes leads to a jump in property tax bills:
Mario Tomsich is one of thousands of single-family Vancouver homeowners whose property taxes have surged an average of 14.2 per cent, seven times the rate of inflation.
“The taxes are just skyrocketing because of the value of the property,” the 75-year-old Vancouver landlord said yesterday. “If it keeps going like this, I would have to do something about it. People have been forced to sell their homes.”
…
Vancouver budget director Annette Klein said the 1.23-per-cent tax increase approved by city council was not reflected for single-family dwellings because their assessed values shot up 30 per cent.
They jumped 15 per cent above the average for the residential class, including condos. Property taxes are based on assessed values.
“Single-family homes are picking up more of the overall [tax] revenue,” Klein said. “They are compensating for slower growth in condos.”
This is the first I’ve heard of slower growth in condo property tax – is there an imbalance in the system and should we expect higher tax rates on condos in the future?
