Municipal Property Assessment

Tax Time
Tax Time

Beauty may be in the eye of the beholder, but the same might not be said about the value of your home in the eyes of a civic assessor. When the City of Calgary assesses your property in order to determine the value of your home and in turn, your share of municipal tax, there’s always the possibility of a distortion in how much your home is really worth and how much the tax will affect your household bottom line.

City formula

Conducted annually and following stipulations in the provincial government’s Municipal Government Act, the assessment conducted by the City of Calgary bases estimates on analysis of the real estate market and determines the market value of your property by July 1. The formula used to calculate your taxes is relatively simple. The assessed market value of your property is multiplied by a tax rate determined by the city’s budget, usually determined in April. Assessment notices are then mailed out informing you what your taxes will be as of July 1 of this year.

Independent appraisers estimate that for every $100,000 your home is worth on the real estate market means roughly $500-$600 of tax you might wind up paying the city. So far in 2013, the city, based on nearly half a million assessments already mailed out have determined that house and condo properties have increased by three percent over the year with the median value of a home estimated at $410,000 and condos pegged at $250,000. The city deduced that 57 per cent of residential properties will enjoy a taxation decrease, with 43 per cent will experience an increase. Only five per cent of properties assessed will increase or decrease by more than 10 per cent of 2012 taxes.

Economic reality

The problem with assessments, according to most realtors and independent appraisers, is the city’s estimates don’t reflect economic reality in the real estate market. For openers, 2013 appraisals are based on July 1, 2012 market values, and as figures released regularly by the Calgary Real Estate Board indicate, fluctuations present a different picture. As well, given that the city uses a sales comparison approach, their most common methods of assessing residential property, the assessor bases findings on market figures, and never even sees the properties being assessed. This fails to take into account any damage into the property, curb appeal, renovations or even the presence of additional assets like a detached garage.

An assessor may not even be using the accurate square footage in comparing value to other homes in the neighbourhood, which might further misrepresent the value of your home, which in turn spells an inaccurate amount of property taxes you may have to fork out annually. That’s because the city follows a mass appraisal process based on available statistics that don’t take into account individual characteristics of a property. To counter any uniform estimate, the city also uses multiple regression analysis before arriving at a final figure.

Evidence of inaccuracy

In Calgary, Realtor blogs are rampant with anecdotes of how property values of homes they listed and sold wavered from city assessments. Several Realtors observed that the use of the two models could create inaccuracies as high as 50 per cent. Even in a select neighbourhood. One side of the street may have homes assessed up to seven per cent higher than real market value, while property across that same street may witness values decreased by that same percentage.

To ensure a more accurate portrayal of property values, residential home owners are advised to check the information about their home, from square footage to extent of renovations. They should also contact a local realtor who can provide statistics of the value of their homes sold on or around July 1 the previous year.

However, when it comes to balancing the value of your home versus the amount of tax you have to pay, you can’t have it both ways. A lower property value obviously means lower taxes, but it may also have a detrimental effect on your equity, and vice versa. For more information on how assessments may affect you, visit the City of Calgary online at calgary.ca/assessmentsearch.

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