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Why did the value of my building go up when I made no improvements?

Q: Why did my assessed value of the building portion of my property go up by over 40% when I made no substantial improvements to the house before the July 1, 2015 date?

My house was built in 1954. Don’t homes typically depreciate over time unless substantial renos (permitted) are completed?

Curious to know the justification.

A: I don’t have an answer yet but I’ve heard this from a couple of other people. Anyone have any idea why this might happen?

  • Kenji

    Perhaps it is the replacement value that is calculated, which would rise in accordance with costs of materials, labour, permits and market conditions.

  • jenables

    Well, there doesn’t seem to be any rhyme or reason to it. Looking at the building I used to work in, 2100 west 4th, the improvement value dropped by over 1.5 million. It’s still there, same as it ever was, as far as I can tell. But the decrease was more than compensated by the increase in land value. It’s so messed up.

  • peakie

    End of averaging cycle?
    “Assessments are the estimate of a property’s market value as of July 1, 2015 and physical condition as of October 31, 2015. This common valuation date ensures there is an equitable property assessment base for property taxation.”

    I might blame new, recent Google streetviews if that is one of their tools for assessment.

    Skimming BC Assessment for house value, we find that Thompson Cariboo is moaning and prompted this memo

    Property Photo Update Initiative – Thompson-Cariboo
    Frequently Asked Questions for Property Owners
    Q. Why is it necessary for BC Assessment to take photos of properties?
    BC Assessment’s mandate is to ensure that all properties in B.C. are accurately, fairly and equitably assessed for property tax purposes. To keep our information up to date, we periodically take street front and aerial photographs, visit property owners or mail questionnaires to property owners asking a number of questions about their property, such as number of bedrooms and bathrooms and building dimensions.
    Q. What’s so different about this photo update initiative?
    Instead of appraisers walking slowly from house to house to inspect and photograph properties from the street, we have contracted a private company, Facet Technology, to update street front property photos quickly using digital camera equipment mounted on a mobile van.

    … [ MORE ]

  • AdamFitch

    Assessed value is based on market value, and is calculated based on many factors and complicated formulae. Haven’t you heard that real estate values are going up in Vancouver and generally in BC? At least that is true in the hot markets.

    As market values go up, assessment values go up too. But do not be concerned that your property taxes will go up proportionally. This is a common mis-understanding.

    Municipal property tax rates are set based on total spending budget, minus all other funding sources (eg: fees, grants, loans), divided by the total property tax roll assessment value. So as values go up, the mil rate goes down.
    So, if your property assessment value went up 40% compared to last year, and the AVERAGE property assessment value in your municipality also went up 40%, then your property taxes will stay the same. If your value went up MORE than the average, your taxes will go UP. If your value went up LESS than the average, your taxes will go DOWN.

  • rowbat

    As I understand it, BC Assessment estimates the total value of the property, and also the land value only (i.e. if the lot were vacant). The value of ‘improvements’ isn’t estimated separately – it’s just what’s left over from subtracting the land value from the total value.

    This makes sense, because both ‘total value’ and ‘land value’ are relatively easy to estimate. To try to value every building separately would be very complicated. And in the end it wouldn’t mean much anyway, since people are either interested in ‘land + building’ as a package, or they’re interested in ‘land only’ as a site for a new house. No one’s interested in ‘building only’, unless they’re planning to move it off the site.

    If you do a lot of improvements to a house (and BC Assessment knows about it), the total value of the property may rise somewhat (although usually by nowhere near what you spent). The land value is unaffected by the improvements of course, so the increase in total value will show up under ‘improvements’.

    If no work has been done to a house but the improvement value has risen, it probably means that the market is marginally more interested in keeping that house than it was last year.

    This could very well be true for a livable house in good condition, especially at the lower end of the market. There are a lot of buyers who desperately want a house, but can’t afford to demolish and build new. So given a choice between 2 houses next door to each other on identically sized lots, one with an attractive and livable house and one with a house in poor condition, the livable house will obviously go for a premium. The land value would be the same for both of course, so the extra value will show up under ‘improvements’, even if nothing had been done to it for years.

    Modestly-sized mid-50’s houses in good condition (perfect for a young family, and keeping in mind that ‘mid-century’ design is now quite popular), could well be seeing increased demand over the last few years, and might be appreciating in total value slightly faster than other properties. Since its land value is still the same as other properties nearby however, any relative increase in total value compared to its neighbours can only show up under ‘improvements’.

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