Many Vancouverites may be frustrated that homes in their region — already the least affordable in North America — are being slapped with new taxes, but data shows homeowners in the city have actually been getting a very good deal. An excellent deal, really.
In a new study from home listings site Zoocasa, the city has the lowest property tax rate among Canadian municipalities, at just above 0.24 per cent of a property's value. In fact, according to Bloomberg, it's the lowest property tax rate of any city in Canada or the U.S., beating out Honolulu at 0.33 per cent.
Someone who owns a million-dollar property would pay $2,468 in property taxes in Vancouver, Zoocasa estimated, compared to $6,355 in Toronto and $10,684 in Ottawa.
Low property taxes may be part of the reason why Vancouver's housing market has been so attractive to foreign buyers and investors.
Sherry Cooper, chief economist at Dominion Lending Centres and the former chief economist at Bank of Montreal, noted that the "annual cost of owning a home in Vancouver ... is roughly half that of Toronto, a third that of Seattle and almost a fifth that of San Francisco."
"For foreign buyers, Vancouver is a relatively inexpensive place to park money."Sherry Cooper, chief economist, Dominion Lending Centres
"This has been a significant incentive for speculative investment, especially in high-end homes and in turn, it is likely a historical factor that has driven up home prices over the past twenty years," Cooper wrote in a client note Friday.
But the city likely has a reason for such low rates: Homes in many formerly middle-class neighbourhoods are now worth more than $2 million, and higher tax rates could crush many older, retired people living on a fixed income.
B.C.'s provincial government and Vancouver's city council are working to temper house price growth. The city has introduced a school-tax surcharge on properties above $3 million, much to the chagrin of high-end homeowners. As well, the province's foreign buyers' tax was increased to 20 per cent this year, from 15 per cent.
All the policy changes seem to have had some effect. Home sales in Greater Vancouver fell to an 18-year low in July, as buyers took a "wait-and-see" approach to the market.
What do average homeowners owe?
But tax rates alone don't determine what homeowners pay; the assessed value of a home is what the tax collector uses to calculate the rate. So to get a broader picture of who's paying the highest and lowest taxes, we looked at the estimated bill for a typical (average or benchmark) home in each city.
Looked at this way, the numbers tell a different story. Vancouver is still relatively inexpensive, but not the least expensive.
Note that Toronto and nearby cities take the cake, with Hamilton leading the country at $6,939.59 for an average-priced home. That's the result of the massive run-up in southern Ontario house prices over the past few years.
But with any luck, homeowners won't be paying rates quite that high. Typically, when prices spike, city council reduces the tax rate to lessen the shock to homeowners. That's likely to happen in Ontario after the next round of property value assessments. For instance, Toronto mayor John Tory has vowed to limit property tax increases to the rate of inflation.
Let's hope other cities in the region follow suit, or southern Ontario homeowners may suffer serious sticker shock at reassessment time.