The dip in property value assessments across Greater Victoria is not a sign of doom and gloom, nor is it a guarantee your property taxes will go down. It’s merely a reflection of the market.
According to numbers released by B.C. Assessment this week, the assessed value of properties in the capital region dropped by one to seven per cent in the past year, depending on the municipality. Assessment is a dollar value put on a property for taxation purposes. But a drop in your assessed value doesn’t necessarily mean you will pay less in taxes — a municipality determines what revenue it requires to meet its needs and sets the tax rate accordingly.
The assessments are down because home sales are down — five per cent fewer homes were sold in Greater Victoria in 2012 than in 2011. Prices declined about 1.7 per cent in the same period. Such fluctuations are normal.
In real estate, one person’s bad news is another person’s good news. House prices have been going up faster than incomes, and stable or lower prices can be an opportunity for those pursuing the dream of owning a home.
For some, it’s an impossible dream, and will be for a long time to come. An old rule of thumb was that you should pay no more than 2.5 times your annual income for a house and you should have a downpayment of 15 to 20 per cent. Granted, that’s an oversimplification, but the concept is sound — you should save up so you will have some equity, and you shouldn’t take on more than you can afford.
Given that the median annual income in Greater Victoria is about $80,000 and the median sale price for a single-family home is close to $600,000, many families are priced out of the market.
While home ownership is a worthy goal, it is one that should not be pursued at any cost. In the U.S., owning a home became entrenched as an essential component of the “American dream.” Politicians espoused the cause, and lenders willingly co-operated, making it easy to get financing. Too easy. People bought houses who couldn’t afford them. Prices skyrocketed. People who owned adequate houses upgraded to mansions, counting on rising prices to increase the value of their investments.
It was an unsustainable bubble, and when it burst, it brought about the U.S. financial crisis of 2006-08.
The effects of that crisis spilled into Canada, although more sensible lending policies this side of the border spared Canadians from much of the pain experienced in the U.S.
In Victoria, the real estate situation seems more stable than elsewhere in the country — as one real estate agent put it, “Vancouver Island is a great place to live and people will always want to live here” — and for some, the downturn could be an opportunity to get into the market or for the kids to stay in Victoria.
But it’s an investment that should be done prudently and carefully. A home is the biggest purchase most people will make, and it deserves careful thought and analysis, particularly when prices go up or down.
This short-term blip in house prices is likely just a footnote for most capital region homeowners, who are in for the long haul. For others, who are eager for a chance to own a home in Victoria, it could be an indication that this is the time to get into the market.
