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Prooperty Tax (Council Tax) increase in line with new sale price???

Prooperty Tax (Council Tax) increase in line with new sale price???

Old Jun 24th 2021, 3:03 pm
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Default Prooperty Tax (Council Tax) increase in line with new sale price???

Hey guys

We're living in Canada (Nova Scotia) and looking at investment properties.

We're in the middle of a housing boom right now and in some areas houses are selling for DOUBLE what they did just two years ago (pre COVID).

We need to know if the property tax (aka council tax in the UK!!!) increases directly in line with the new sale price? Example...

A house was bought 5 years ago for $150,000 and has tax of $2,500. The price now is $300,000, would this mean that once it is bought that the property tax will shoot to $5,000???

Need some help or clarification on this!

Another example, we bought a SMALL 2 Bed rental property for $60,000 two years ago, which has tax of $1,500 (it's in town!). The value is around $150,000 now, which is 2.5x what we paid. So, would new new buyer be hit with a tax bill for $4,000 for their SMALL house? Just seems unrealistically impossible, and this example is a very real one, and lots of properties have double in value in 2-3 years (!!!)

Anyone have any insights into how the tax works post-sale?

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Old Jun 24th 2021, 3:40 pm
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Default Re: Prooperty Tax (Council Tax) increase in line with new sale price???

Property tax isn't based on the sale price of a property but a nominal value which is reassessed from time to time (every four years here, I think). The tax payable goes up when the nominal value is reset (assuming the tax rate doesn't change). In Ontario that increase is phased in over a period of four years.

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Old Jun 24th 2021, 5:04 pm
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Default Re: Prooperty Tax (Council Tax) increase in line with new sale price???

In BC, you receive an assessment of the value of your house and land every January.

That assessment is based on an average of recent sales in your neighbourhood as of the previous July. It makes no difference as to how old your house is ......... here increases really depend on the value of the land.

That means our 75 year old small bungalow with basement , 2 bedrooms, 2 full bathrooms, is valued on the same basis as the house next door which was built in 2009, 2 storey with basement, 4 bedrooms, ??# bathrooms. We're both located on exactly the same sized lot ..........33' by 120' Their house is valued at more than ours because it is bigger.

Our assessment in January had gone up just over $200,000 over last year's. Before that the assessment had been decreasing steadily (thank heavens) from the high value of over $2 million in 2017.

The sales price of a house is almost always higher than the assessment, sometimes by a sick-making huge amount.

House assessments are set by the Provincial Government.

The City Council sets the budget. for the city and thus the city taxes ........ the budget is debated based on "wants" declared by all the city departments, public input requested, and finally determined ............. always much less than the "wanted" amount. What you pay is based on a whole series of services that you receive, the cost of which is determined as a percentage of the amount needed.

I have my current due Property Tax Notice at hand (due July 4). For example Provincial School Tax Rate is 0.9661 or $1,604.19 (if we had to pay the full amount). Rate for Regional District Services 0.05403 ........ and so it goes.

For your interest, the amount I have to pay, with a reduction for being over 65, is $3,275.18, but I have already paid $2,566.00 back in January, so this year's full tax amount is $5,841.18. That's about $400 more than last year. I think the city increased the budget by about 3.5-3.7% over last year, after much debate ..... the demands would have meant around an 8% increased.

The house next door has been lived in by the same family since it was built, and is assessed at over $2 million, thus their taxes will be higher than mine.

I assume that NS has a somewhat similar system ............. but as the taxes are based on an assessment of the value of the house last July, if it sold after that date, then there will not be much of a change in the immediate year following. That's because the sale price of that house would not be included in the neighbourhood assessment.

You are actually dealing with 2 authorities ....... the provincial government determining the actual value of your house (the assessed price), and the city or municipal region setting the city taxes based on their needs.

Google Halifax City Taxes to get an idea of how it goes.
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Old Jun 24th 2021, 5:26 pm
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Default Re: Prooperty Tax (Council Tax) increase in line with new sale price???

Originally Posted by Lion Heart View Post
Hey guys

We're living in Canada (Nova Scotia) and looking at investment properties.

We're in the middle of a housing boom right now and in some areas houses are selling for DOUBLE what they did just two years ago (pre COVID).

We need to know if the property tax (aka council tax in the UK!!!) increases directly in line with the new sale price? Example...

A house was bought 5 years ago for $150,000 and has tax of $2,500. The price now is $300,000, would this mean that once it is bought that the property tax will shoot to $5,000???

Need some help or clarification on this!

Another example, we bought a SMALL 2 Bed rental property for $60,000 two years ago, which has tax of $1,500 (it's in town!). The value is around $150,000 now, which is 2.5x what we paid. So, would new new buyer be hit with a tax bill for $4,000 for their SMALL house? Just seems unrealistically impossible, and this example is a very real one, and lots of properties have double in value in 2-3 years (!!!)

Anyone have any insights into how the tax works post-sale?
The official websites may be of help - also check your Municipal website ..
https://novascotia.ca/sns/access/lan...operty-tax.asp
and
https://www.pvsc.ca/en/home/frequent...s/default.aspx



Unlike Ontario, in Nova Scotia it appears the value is set in January each year
https://www.pvsc.ca/en/home/frequent...wner-faqs.aspx

My assessment notice displays two values, an ‘assessed value’ and a ‘taxable assessed value’. What is the difference?

The assessed value reflects the real estate market value of your property as of the base date, January 1 of the previous year, and the physical state of your property as of the state date, December 1 of the year just prior to the date on your assessment notice.

For example: Your 2021 assessment notice will have a base date of January 1, 2020 and a state date of December 1, 2020.

The taxable assessed value is the amount your municipality uses to calculate property tax bills and if eligible, will reflect a capped assessment.

Last edited by Siouxie; Jun 24th 2021 at 5:39 pm.
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Old Jun 25th 2021, 11:38 am
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Default Re: Prooperty Tax (Council Tax) increase in line with new sale price???

Lion Heart

We bought a second property in NS, October last year.

Previous owner bought it 11 years ago at $120K we paid $260K.

Our property taxes are the same as for the previous owner.

Some counties in NS are capped Guysborough county where we bought has some of the lowest taxes in NS. I expect my taxes to rise next year but with the cap, not as high as they could.
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Old Jun 25th 2021, 2:11 pm
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Default Re: Prooperty Tax (Council Tax) increase in line with new sale price???

Thanks guys! Yes, in NS we are seeing a lot of properties with the tax 'capped'. BUT that only seems to apply whilst the same person owns the house, and this seems to be 'reset' when it is sold.

Our neighbour has lived in their place since 1975ish and so their tax is minute, about a third of ours.

The jumps in tax prices seem to correlate with the sale, and viewpoint.ca is very useful for this as it shows the years sold and each years tax % rise/fall, and so you can correlate the two to a degree.

But what is concerning, is house prices have doubled in the last 18 months in our region, and looking forward to invest it's hard to gauge if that tax is likely to triple if the house has not been sold for a while. So we're interested/concerned if property taxes are effectively going to be double what they were 18 months ago if a property is bought today.

The official website gives the usual vague and non-definitive information, as expected really!!
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Old Jun 25th 2021, 4:51 pm
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Default Re: Prooperty Tax (Council Tax) increase in line with new sale price???

Originally Posted by Lion Heart View Post
Thanks guys! Yes, in NS we are seeing a lot of properties with the tax 'capped'. BUT that only seems to apply whilst the same person owns the house, and this seems to be 'reset' when it is sold.

Our neighbour has lived in their place since 1975ish and so their tax is minute, about a third of ours.

The jumps in tax prices seem to correlate with the sale, and viewpoint.ca is very useful for this as it shows the years sold and each years tax % rise/fall, and so you can correlate the two to a degree.

But what is concerning, is house prices have doubled in the last 18 months in our region, and looking forward to invest it's hard to gauge if that tax is likely to triple if the house has not been sold for a while. So we're interested/concerned if property taxes are effectively going to be double what they were 18 months ago if a property is bought today.

The official website gives the usual vague and non-definitive information, as expected really!!
The provincially legislated Capped Assessment Program (CAP), which came into existence in 2005, places a ‘cap’ on the amount that residential property assessments can increase year over year. The amount ‘capped’ is based on the percentage change in Nova Scotia Consumer Price Index, which is set by Statistics Canada.
Not Eligible
New home owners: Non-family sale homes are taken out of the CAP program for the year following the purchase.
You can check the sale price / taxes for any property, which might be useful https://www.pvsc.ca/en/home/findanas...t/default.aspx
You can search for a property by address, AAN or sale date using the tools in 'Find an Assessment'.
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Old Jun 25th 2021, 5:03 pm
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Default Re: Prooperty Tax (Council Tax) increase in line with new sale price???

Yes, this is exactly it:

Not Eligible
New home owners: Non-family sale homes are taken out of the CAP program for the year following the purchase.

So when a house is sold, it overrides the CAP (or resets it more accurately) to the current value once it has sold (but not immediately upon sale, come the next round of annual valuations.

It seems our concerns are exactly as expected. If a house was bought for $100,000 two years ago with $1,500 tax (CAP or not), and it sells now at $200,000 then the tax will increase the year after sale to $3,000.

I can see that causing a lot of issues down the line for people, especially those who are struggling to buy their first home as it is with the crazy inflated post-COVID prices. Interesting!
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Old Jun 25th 2021, 7:01 pm
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Default Re: Prooperty Tax (Council Tax) increase in line with new sale price???

Originally Posted by Lion Heart View Post
I can see that causing a lot of issues down the line for people, especially those who are struggling to buy their first home as it is with the crazy inflated post-COVID prices. Interesting!
It's not usually new buyers who have trouble with rapidly rising prices but long term residents, especially those on fixed incomes. Some property tax relief schemes exist but the common case is that people living in a house they paid for years ago are forced out because it's now worth a fortune and they can't pay the taxes.
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Old Jun 25th 2021, 7:52 pm
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Default Re: Prooperty Tax (Council Tax) increase in line with new sale price???

Originally Posted by dbd33 View Post
It's not usually new buyers who have trouble with rapidly rising prices but long term residents, especially those on fixed incomes. Some property tax relief schemes exist but the common case is that people living in a house they paid for years ago are forced out because it's now worth a fortune and they can't pay the taxes.
Maybe that depends on province? In Nova Scotia they CAP the tax rates to prevent this. For example, our neighbour has lived in their house since 1975ish and pays around 1/3 of the tax we do. If he sold the house tomorrow, the new owner would be paying the same as us (approx of course) from year two onwards (i.e. post annual property inspection).
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Old Jun 25th 2021, 8:10 pm
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Default Re: Prooperty Tax (Council Tax) increase in line with new sale price???

Originally Posted by dbd33 View Post
It's not usually new buyers who have trouble with rapidly rising prices but long term residents, especially those on fixed incomes. Some property tax relief schemes exist but the common case is that people living in a house they paid for years ago are forced out because it's now worth a fortune and they can't pay the taxes.
Hence the tax sales

https://modg.ca/sites/default/files/...salead2020.pdf
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Old Jun 26th 2021, 2:34 am
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Default Re: Prooperty Tax (Council Tax) increase in line with new sale price???

Originally Posted by dbd33 View Post
It's not usually new buyers who have trouble with rapidly rising prices but long term residents, especially those on fixed incomes. Some property tax relief schemes exist but the common case is that people living in a house they paid for years ago are forced out because it's now worth a fortune and they can't pay the taxes.
In BC, people over 65 can claim a Homeowner Additional Grant, that basically covers the School Tax part of the City Tax payable.

That helps.

But people like us who bought the house in 1972, paid off the mortgage about 20 years later, have seen our house and land assessment go from 5 figures to over 7 figures and surely can end up in trouble. There are a couple of ways that retired people manage to pay their taxes and stay in their house if their pension is not big enough.

One is to take out a reverse mortgage on the house ................ nothing is paid by the homeowner, any debt accrued is taken out of the proceeds of the sale of the ho9use.

Second is to arrange with the BC government programme to defer paying the taxes, again whatever is owing is taken out of the profits of the sale when that takes place.

In fact, that deferment of taxes is available to anyone .I believe a lot of younger homeowners took advantage of it last year when they had lost their jobs etc due to covid.

Of course, many people bought their houses years ago as a form of "pension" ........... they intended to depend on the money from the sale of the house to support them through old age, care, etc, as well as to provide their children with a nice little bundle of money.
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Old Jun 28th 2021, 10:40 am
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Default Re: Prooperty Tax (Council Tax) increase in line with new sale price???

The way I understood things is that you can only have an estimate on your future property tax.

You get a property tax bill every year, and when you buy the property, you'll know the last year's property tax bill when you're buying. And then the municipality can vote on an increase as well or your property gets assessed and is then taxed higher. In the end, it's always an unpredictable tax. Purely the sales / transaction value is not the real reason for the tax increase.

However I've never owned property in Canada, it's only an observation of mine.
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Old Jun 28th 2021, 2:37 pm
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Default Re: Prooperty Tax (Council Tax) increase in line with new sale price???

Reminder.......... the OP resides in Nova Scotia .... the question relates to the property tax regulations there - not in BC, Ontario or any other Province

Originally Posted by Lion Heart View Post
Hey guys

We're living in Canada (Nova Scotia) and looking at investment properties.

We're in the middle of a housing boom right now and in some areas houses are selling for DOUBLE what they did just two years ago (pre COVID).

We need to know if the property tax (aka council tax in the UK!!!) increases directly in line with the new sale price? Example...

A house was bought 5 years ago for $150,000 and has tax of $2,500. The price now is $300,000, would this mean that once it is bought that the property tax will shoot to $5,000???

Need some help or clarification on this!

Another example, we bought a SMALL 2 Bed rental property for $60,000 two years ago, which has tax of $1,500 (it's in town!). The value is around $150,000 now, which is 2.5x what we paid. So, would new new buyer be hit with a tax bill for $4,000 for their SMALL house? Just seems unrealistically impossible, and this example is a very real one, and lots of properties have double in value in 2-3 years (!!!)

Anyone have any insights into how the tax works post-sale?
.
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Old Jul 1st 2021, 4:30 pm
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Default Re: Prooperty Tax (Council Tax) increase in line with new sale price???

The big picture:

1. Overall municipal taxes are defined by a local government. Could be 3% or 4% annual rise (for example).

2. Then these taxes are divided between properties (and other sources of income).

So, while specifics will vary, doubling of house prices in the area never translates to the doubling of property taxes. On average they will go up by 3-4% a year, or whatever your town decides. So, per dollar of actual house price the rates will go down.
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