Will increasing property values in Durham Region mean more taxes for you?
The number of people who hate property taxes is much more than the number of people who understand property taxes. The mistake most people make is that they think property taxes work just like other taxes; however, the reality is that property taxes are very different from any other type of tax. The housing market is a growing at an unprecedented rate right now and this could end up having a large effect on your property taxes. Let’s go through what Property Taxes are and how they work.
Property Taxes: A Simple Explanation
The biggest difference in property taxes and other taxes is that they are determined the opposite way of most other taxes. Most taxes are levied on activities, and if the government thinks the resulting revenue is too low, they raise taxes for the next year. Property taxes are levied by setting the target first. This means that the municipality first looks at how much money they need and then apply the proper amount of property taxes.
You can see how this affects you by reading the 2015 Budget & Service Highlight of Durham Region. According to the brochure, the Regional Municipality of Durham needs to generate $1.3 billion in order to meet its needs. You can read the full report to see the full breakdown of this number and where the money will go. Now that the municipality knows how much money it will need, it will levy the property taxes accordingly and divide them among all the properties in the region. Thus, property taxes are not affected by a lot of economic activities; they go up or down on the basis of how much money is needed to run services in the region.
Property Taxes are Relative
This is the least understood portion of property taxes. Property taxes are not absolute; instead, they depend on how the other houses in your city are performing. This is done by calculating the average rate of homes, which means how much you pay is not only based to the value of your house. It is much easier to understand with a simple example.
The average value of all homes in the Durham Region in 2014 was $391,692. In 2015, the average price of a home jumped to $442,082, which marks an increase of 12.9%. What this should mean is that any home whose value increased more than 12.9% will pay more property taxes, while any home whose value increased less than 12.9% would end up paying less tax than the previous year.
Why Property Taxes Don’t Seem to go Down
We know what you are thinking; you have never had property taxes going down no matter where you lived.. This is because of what we told you about property taxes being based off the total amount of money the region needs. Every year Durham Region decides it is going to need more money than the last, and then the amount is divided based on homes, which is why property taxes keep increasing.
Should we be mad about this? Not really. The increasing property taxes, if spent properly by the government, pay for better facilities and administration. Basically, if we keep paying more property taxes the region will keep improving, which will keep increasing the value of our homes.
Why are things setup this way? Because they keep things fair. If the properties around you are increasing in value, it means that your financial assets are increasing, which makes it okay to tax you a bit higher. On the other hand, if there is a rich area in your city whose property values are increasing while you live in an area where property values are not increasing, your rate does not increase.
So how are the properties around you being affected? The real estate market is crazy and different areas are being assessed at different rates. Feel free to contact us for expert advice about properties in the Durham Region to find out how you will be affected.