July 31, 2018
How Property Tax Differs Across Canada [REPORT]
When it comes to Canada’s housing markets, our nation tells a tale of many cities; property values, and the economic fundamentals that support them, vary widely from both a municipal and provincial perspective, from coast to coast.
However, while average home prices can differ dramatically by market, so too can homeownership costs. For example, the amount of land transfer tax paid by home buyers when they close on a property can range by as much as $20,000 depending on the market – and as it turns out, according to a recent study by Zoocasa, a similar disparity can be found in the amount of property tax paid across the nation.
Zoocasa compared the property tax rates of 25 major cities across Canada to understand how taxes range between municipalities.
Related Read: These GTA Cities Have the Most Property Tax
How Are Property Taxes Calculated?
While each province and municipality have their own tax formula nuances, an individual’s property tax is generally based on the following:
- An assessment of the value of their home, which is typically conducted by a provincial authority (for example, Ontario’s Municipal Property Assessment Corporation (MPAC), BC Assessment (BCA), and the Saskatchewan Assessment Agency (SAA)). As well, the frequency of assessments can differ by province; MPAC conducts its valuation assessment on Ontario properties every four years, while BC values are calculated each January. A property value assessment takes many factors into account such as neighbourhood, the age of the home, whether it has received significant updates, the size of the lot, etc.
- A residential rate set by the local tax authority or municipal council. This is established annually based on the municipality’s budget and required expenditures for the year. The proceeds of city property tax are then doled out for a number of services including a provincial school tax, local transit, hospitals, police and emergency services, parks and recreation, etc.
Municipalities Set Their Residential Tax Rates
The typical property tax formula for an individual multiplies the municipality’s residential rate by the assessed value of the home as determined by the province. Property taxes are paid directly to the municipality and are generally based on an ad valorem system – meaning tax owed increases in proportion to home values. However, while the province determines the value of the property to be taxed, municipalities have discretion in how increases or decreases are rolled out.
For example, some owners of Vancouver real estate are protected from taxation shock by Land Assessment Averaging. This allows the city to introduce BCA-mandated tax increases in phases, to reduce the tax burden on homeowners whose homes have skyrocketed in value. The criteria for eligibility is determined by March 31st each year; for 2018, homes that have increased in value by more than 19.62141 per cent may pay at the average tax rate rather than their actual assessed value.
In the City of Toronto, meanwhile, the residential property tax rate has purposely been kept near the rate of inflation. This was a campaign promise from sitting Mayor John Tory, and the city also has more wiggle room to keep taxes low as it also receives proceeds from its municipal land transfer tax; it is the only city in North America where home buyers pay LTT at both the municipal and provincial level.
The Impact on Home Buyers’ Budgets
Because property taxes differ between major municipalities, those looking to buy real estate in various cities or towns need to be aware of how the local tax rate, and the appreciation of home values over time, will impact their overall housing affordability.
Out of the 25 major Canadian cities studied, Vancouver ranks the best for property taxes with the lowest rate of 0.24683%; that’s less than half the rate of the next highest city, Abbotsford, BC which has a rate 0.51300%. In fact, the best cities with the lowest property tax rates were generally found in BC, with Victoria at 0.52035% and Kelowna at 0.52605%.
However, living in a region with a low tax rate doesn’t necessarily translate to less tax paid if average home prices are higher. For example, the Toronto tax rate is 0.63551%, which translates into $5,532 of property taxes based on the average June 2018 home value of $870,559. In comparison, the Edmonton tax rate is 0.86869% or about 1.4 times that of Toronto’s, but the average home value in Edmonton is substantially lower at $381,520, which would result in a lower amount of property taxes overall at $3,314.
Within major cities in Alberta, property tax rates varied widely: Calgary has a rate of 0.63573% while Lethbridge’s rate is 1.11067% or about 1.7 times that of Calgary’s.
There is also a large range in property rates for Ontario cities: London’s rate of 1.35082% is more than double Toronto’s rate while Ottawa’s rate of 1.06841% is 1.6 times that of Toronto’s.
Check out the infographic below to see how property taxes rates differ in major municipalities across Canada and how much in property taxes those rates result in, based on sample home value assessments.
All property tax rates were sourced from municipal websites.
NOTE: The amount of property tax included per city represents sample calculations only, based on the assumption a property is assessed by its provincial tax authority to be valued at a flat amount of $250,000, $500,000, or $1,000,000. Sample calculations are not to be construed as an assessment of property tax to be paid per municipality and do not factor in actual provincial property assessments.