Westside Owner – “I am grateful for what I have, I take care of my property and live frugally so I am able to pay mortgage and property tax. I am paying tax on an over-valued asset.”

notsellingyet at VREAA 25 June 2011 at 1:01 pm
“In his movie, ‘Everything’s Gone Green,’ Douglas Coupland introduced a couple other means of livelihood in Vancouver–lottery scams and internet porn. Don’t know anybody involved in those ‘industries’ so not sure how much $$ those ‘jobs’ bring in. My husband and I bought a fixer-upper in westside Vancouver in 2000 (market still depressed) with down payment from our own savings and a gift from generous relatives. We diligently paid the mortgage over the years with hard-earned $$ from our respective white-collar jobs (medical research, computers). He passed away recently– I used his life insurance proceeds to gut the house and put in a rental basement suite. My total square footage increased 14.5%, while my property tax increased 33.3%, thanks to yearly tax increases, increase in my property assessment and property tax shifting (from business to residential properties) started by the NPA and continued by Gregor’s gov’t. In BC, property assessment values are based on market value (therefore influenced by skewed prices) and not replacement value. In this scenario, banks and municipal governments always win. Banks will keep enticing home owners with home equity loans they can’t afford based on unrealistically high property assessment values, and municipal gov’ts collect ever-increasing property taxes based on unsustainable, hyper-inflated market values. As far as I am concerned, market value is irrelevant as long as I don’t sell my house, but under the current property taxation system, I am paying for an over-valued asset which is clearly on paper only or, as poster DM has called it, ‘illusion of wealth.’
I am grateful for what I have, I take care of my property and live frugally so I am able to pay mortgage and property tax, but there may come a time when I may have to consider lottery scams — internet porn and drug peddling aren’t my thing. I also know I’ll keep buying goods via the internet (started during reno), and pick up from a relative’s place in WA state, or a mail receiving business in Blaine. I’ll bulk-buy to minimize cross-border travel. I hope as long as I am upfront with Canada Customs border agents, they’ll continue to wave me through without collecting sales taxes. Sorry, local businesses, I can’t support you much anymore–wanna join my future lottery ‘business?’
PS. The house across the street from mine has changed hands 2x in the last 18 months. A young family (from somewhere in the Far East, they did not venture out much) lived in it for approx 1 yr, then put the house up for sale in March this year. Sold in April, the house has been reno’d cosmetically since then, and will be back on the market soon. I’d like to see how much this one goes for.”

24 responses to “Westside Owner – “I am grateful for what I have, I take care of my property and live frugally so I am able to pay mortgage and property tax. I am paying tax on an over-valued asset.”

  1. Mill rates (tax per $1000 assessed value) have actually been going down: http://vancouver.ca/fs/budgetServices/taxrates_2011.htm

    My understanding is that property tax for a specific property only goes up if the city’s budget increases, or if the assessed value of that specific property increases more than other properties.

    • One’s property taxes simply is the answer to the question, “How do we pay for all the stuff the City does?”

      One big item next year will be adjusted mill rates for westside detached relative to condo and other. If the recent prices hold — assessments are based on sales from this time of year — there will be a bit of sticker shock.

    • When has the city’s budget not increase year over year over the inflation rate?

  2. I’m sorry… Someone who bought in 2000 now fretting over living costs? Higher prices are not this anecdote’s problem.

  3. Even with big equity from buying early, carrying any kind of mortgage, plus property taxes of 8K per year, utilities of $5k per year, maintainance of a modest .5% per year-$8k-a modest ($1.6m)westside houuse requires a good income to carry.
    Add in a cost of capital of 4% (5 year mortgage) and its not for the working class. Especially when it stops appreciating and is simply shelter.

  4. Jim writes “especially when it stops appreciating and is simply shelter”. Here’s the crux of the problem that Westside Owner is speaking of. The massive inflation of housing market values (that surplus value which is far removed from any real use value) has meant that, in Vancouver, houses are not to be considered homes. What we get instead is the “fluffed home” of the realtor’s Open House; a temporary stage that is only rented for the occasion until the commodity exchanges hands. This logic unfortunately does impinge upon the world of ‘real’ use-value homes, where actual people live and work and play. As Westside Owner notes, homeowners are paying taxes on over-valued assets. I am not anti-tax and I strongly believe in the adage of the “common-wealth”, yet this summer’s tax represents for me the first time I’ve had to pay property tax without the benefit of the homeowners grant. (My home is a very old house on a very busy street and according to my tax assessment, the majority of its value is ‘land’). Who benefits from these hyper-inflated land values and the concurrent increase in taxation? Condo developers most certainly do, the profiteers of the Olympics may continue to do so, as do those speculative builders who swoop down on the homes of little-old-ladies, now too impoverished to pay their property taxes. In this regards, a market-value based system of taxation creates a neat ‘stage’ for developers and the City that loves them.

  5. I wonder if people remember about ten years back the old ladies of Dunbar etc were able to reverse a CofV tax hike by argueing they couldnt afford the raised property taxes on thier drafty old houses they`d lived in since 1940…

    That the homes were at that point worth three quarters of a million bucks and they certainly had the resources if not the income to pay thier share was swept under the carpet- the City backed down after the bad optics of the grandmothers rampant.

    I`ll give you my prediction regarding the future of RE values; the day is coming within 15 years when it seems undervalued to most people. If you could make an unemotional assessment of the specific value *to you* of a given property with all its costs and flaws you might well come in at 10% of its current *value*.

    Thats to say a house in a prairie city will be under 100 grand, a condo in Vancouver would need to be pretty damn sweet to draw 75 grand and a hella lot of places will become essentially unsaleble. Some buggered up old moldy west side Saddams Palace with basement suite and pink stucco will be such an albatross it will be worth more torn down than standing.

    Expect what happened in Shaughnessy in the Depression, a lot of these barns are gonna be rentals and the modern equivalent of rooming houses, for the Slumlords of Tommorrow.

  6. CanuckDownUnder

    The real problem here seems to be that even in 2000 they couldn’t afford to buy the house they did, they had to rely on generous relatives to make the down payment.

    And yet another person who doesn’t understand how the property tax system works. Then again as an apparent fan of Douglas Coupland she has revealed her complete lack of intelligence.

    • Ugh, dude, she’s a widow.

      • CanuckDownUnder

        So what’s your point exactly? Was my tongue in cheek Douglas Coupland statement offensive? You obviously haven’t read any of his work…

        The fact is that anyone complaining about paying too much property tax because their assessed value has gone up is just wrong. If everybody’s assessment goes up 50% and municipal spending goes up 5% then your property tax bill only goes up 5%. In other words it’s relative, not absolute.

      • I read Coupland all the time in this stupid hope that he writes something as brilliant as Microserfs again. Sadly, I don’t think it will ever happen.

        Your statement reads like someone calling a recent widow, dumb.

      • And I am terribly sorry for her loss.

        But to use the life insurance benefit to put in a rental suite in an environment with yields this low without realizing the tax implications was quite irresponsible.

        My Dad passed away last fall and it has been tough on my mother, but mom did not HELOC their house to make up for the loss of his pension checks.

        She also openly admits to cheating on duties and taxes at the border.

        Personal grief does not give one a free pass.

      • Yes well if only everyone had such a tight grip on their bootstraps in their moments of grief.

      • notsellingyet

        Matt, thanks for the sympathy. I’m new at widowhood, but I aim to continue to be a contributing and productive member of society, regardless of widowhood and RE bubble. Never read Coupland, saw his movie shortly after moving back to Vanc (to be closer to family, lived/worked in US for 8 years) — was amused to see a movie which is about/satire of Vancouver –or at least that’s what I recall of the movie. I don’t claim to be as sophisticated or smart as CanuckDownUnder, but I think I am doing OK in my little world.

      • notsellingyet

        JRoss, sorry about your dad’s passing, and more power to your mom for making wise financial decisions. I wish her the best. Please don’t make assumptions about my situation. My grief has not reduced me to cheating. All items and receipts always offered to Customs officer during border crossing, but they would just wave me through. Perhaps they think the same way I do about prices of goods and sales taxes in BC. Everything done during reno were issued permits and inspected by city, and passed (whatever that’s good for). I paid for business license (from city hall) for rental suite, the rental income is declared on my income tax return, and home insurance taken out for 2-family dwelling to cover rental suite.

    • notsellingyet

      CanuckDownUnder: You can cite all the numbers and rates you want, but at the end of the day, property tax rates in BC are based on average selling price of ‘comparables,’ not replacement value. We all know what’s been happening to selling price of houses.
      I don’t deny that my husband and I needed a bail-out by relatives to buy a house in 2000. I’m not trying to flaunt it, but it’s not our fault that we have generous relatives. Refusing their gift would have been utter lack of intelligence on our part. My husband and I pooled all our life savings together with the relative’s gift for the down payment, so we were (I still am) very much invested in the property. The down payment allowed us to keep housing expenses (mortgage, property tax, electricity, gas, insurance) to <20% of gross income. That number is slighty higher now, and if it creeps higher, I will weigh my options with my lack of intelligence, and make decisions accordingly.

  7. The emotions would be quite different if this story was about struggling with the cost of owning and operating a car

  8. Maybe living as a widow is a lot harder than living as a couple with both people working?

    Yes, yes, I know people will scream, sell the house, take the gain, go rent, etc, etc. However given the sad state of rental pool in this city and the fact we don’t have all the info about her situation, maybe sell and rent/move isn’t the best option for her? I would give her the benefit of doubt until we know more info.

    • notsellingyet

      Space, thanks for your thoughtfulness. Sometimes RE is not all about $$ balance sheets. As I stated on other comments in this blog, RE decisions can be emotional and my decision to stay and reno is partly emotional. Maybe I will regret this decision, but we’ll have to see, I guess.

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