There they are — those numbers in bold on the top of the property assessment report from the City of Edmonton, casting judgment on many a family's most valuable asset.
There they are — those numbers in bold on the top of the property assessment report from the City of Edmonton, casting judgment on many a family’s most valuable asset.
Edmonton property owners may wonder what the city’s assessed value of their home or their neighbourhoodmeans for the market value of their condo, duplex or house, particularly with the average assessment values sinking for three consecutive years.
Could it affect the sale price of their house?
How do city bean-counters calculate these things, anyway?
These questions may be particularly top of mind given that Edmonton is a buyers’ market in 2019.
Who’s hot, who’s not
Rod Risling, the city’s branch manager of assessment and taxation, said in an interview last week that these trends can fluctuate up and down substantially, and that longer-term patterns are more meaningful than year-to-year comparisons.
However, the city only publishes year-to-year comparisons, not five-year or 10-year trends. Owners can see assessments over time for just their property when they log on to myproperty.edmonton.ca.
Topping the list of largest neighbourhood jumps in house assessment value this year are Lansdowne, Belgravia, Windsor Park and Skyrattler in southwest Edmonton, along with the mostly rural Riverview in west Edmonton.
Realtor Brad Bosker notes the ups and downs do match market trends in the city. He was unsurprised to see values rise in Malmo Plains and Empire Park, as people priced out of McKernan, Belgravia and other areas near the University of Alberta look further south. Likewise, higher prices in the desirable Glenora neighbourhood are prompting people to buy to the northwest in McQueen, he said, where assessed values also rose.
Houses in Kinglet Gardens, Rundle Heights, Boyle Street, Cromdale, Lauderdale, the Uplands, Virginia Park and Kensington saw the largest average decreases in assessment value compared to last year.
Condos a different story
Overall, Edmonton condominiums saw a more marked decrease in assessment, dropping 4.5 percent from last year. However, nine neighbourhoods had condo assessments that either stayed flat or rose slightly — Albany, Glenora, Graydon Hill, Jamieson Place, Lago Lindo, Ogilvie Ridge, Paisley, Rundle Heights and Webber Greens.
The neighbourhoods posting the largest drop in condo assessment values were Ottewell, which had a 24.4 percent decline, Fraser, with a 24.3 percent drop, and Aspen Gardens, where condo assessments plunged 17.8 percent. Assessments of condos in Patricia Heights, Wild Rose, Rideau Park, Balwin, Ozerna, Matt Berry and Belvedere also declined more than 10 percent.
It’s a trend Darcy Torhjelm, past president of the Realtors’ Association of Edmonton, would expect to see with a lack of investor confidence in the area and a stalled Trans Mountain pipeline expansion project. Condo prices are typically more volatile than single-family home prices are, he said.
Following the rapid growth and demand for housing in 2008, Edmonton’s condo market has been overbuilt, he said. There’s a lot of choice right now, and people who might previously have bought a condo might be able to afford a townhouse instead, he said.
For property owners whose assessment values dropped and are thinking of selling, realtors say stay calm because assessments don’t have much influence on house prices.
More important is what a similar house down the street sold for, or whether there have been recent renovations to a kitchen or bathroom, Bosker said.
He also said real estate is “intensely local,” and many micro markets don’t necessarily follow citywide trends. Generally, property closer to the centre of the city is retaining its value better than homes on the outskirts, he said.
Property assessments, which the city calculates to decide how much property tax owners should pay, are determined by “mass appraisal,” and determined by algorithms and formulas that group properties with similar attributes. Provincial legislation guides many of the city’s practices, Risling said.
There’s no way city employees could inspect about 400,000 properties each year, he said — last year, inspectors looked at about 13,000 of them, many of which were new houses. The city assumes owners are performing routine upgrades on houses, such as window and roof replacements.
The most influential factors on assessed value include home size, property size, location, the home’s age and condition, Risling said. City workers also track sale prices, building permits for renovations and real estate listings, and factor in information submitted by property owners, he said.
The city’s guide to residential land assessment lists dozens of other minor, moderate and major factors plugged into the formula, including proximity to the river valley, a golf course, lake, or sound attenuation wall, which all increase value. Pushing assessments down are the close presence of a bus stop, community mailbox, church, store, ski hill, or industrial operation that emits pollution or a bad smell.
Proximity to a busy road, rail line, an irregular lot shape or “averse topography” that makes construction difficult also play a role.
New mortgage eligibility rules affecting buyers
However, newer federal rules about borrowing could have a more profound effect on Edmonton property values than nearby overhead power lines or an irregular lot shape.
As of October 2016, anyone applying for a mortgage in Canada with a down payment of less than 20 percent has to pass a “stress test” to check if they can afford mortgage payments at higher interest rates. Lenders had to calculate whether the borrower would qualify for the mortgage at a rate two percent higher than what they were offering, or the Bank of Canada’s lending rate — whichever was higher.
Effective in January 2018, the government expanded the stress test requirement to all borrowers, regardless of their down payment.
The moves came from the government’s concern with Canadians’ rising debt levels, to assure lenders that buyers would be able to make mortgage payments, should interest rates rise, said Canada Mortgage and Housing Corp. market analyst James Cuddy on Thursday.
Those rules may have made sense in markets like Toronto and Vancouver, where house prices were skyrocketing, but Edmonton is less volatile, realtor Bosker said.
“That’s changed the market in a significant way,” he said of the rule changes. “I’m seeing expensive homes become a lot more difficult to sell.”
It’s pushed up the average age of his clients, Bosker said, pointing to a drop in the number of 25-year-olds at the beginning of their careers looking for houses. When they qualified for a $360,000 mortgage, they had a lot more options than if they qualify now for $260,000.
“It’s tough out there for young people.”