Last updated on March 10th, 2023 at 10:50 am
Wow—2022 was certainly a year to remember for more reasons than one. But real estate really was the thing to watch over the past year, as homeowners and would-be-homeowners alike watched with bated breath for any sign of a downturn.
Well, truth be told, the downturn is here. And it was brought to us by the Bank of Canada, who jacked rates up to 4.5% as of last month.
Because of these rate increases, it is now much more expensive to finance a home. That has driven home prices down across Canada. In my own region, overall prices are down 3.3% compared to the previous year and down over 9% compared to just six months ago.
Property Assessment Confusion
However, something confusing happened.
Since the B.C. Assessment (our property assessment authority in British Columbia) analyzes the market and records property values on July 1st, my current assessment shows my home is up in value. Pretty odd, considering the market is generally down compared to this time last year.
The Vancouver Sun summarized this phenomenon quite well in their recent article:
B.C. Assessment has advised homeowners that the value of their property as listed early in the new year will likely be very different from the reality of the current housing market. That’s because January’s annual assessments are based on market values on July 1, 2022, a time when the British Columbia real estate market was hot.
Thanks to this, uhm, accounting error, my property assessment has diverged from the true value I could receive if I sold my house today.
My Property Assessment
With that all in mind, my new property assessment states my home has increase by $115k compared to the previous year.
This, obviously, is a poor reflection of what I would receive had I tried selling my home today.
And I can see this is true first-hand, with my neighbour’s home sitting unsold after being listed for a value far below its current assessed value.
What makes things even more confusing is that just last spring I received a home equity line of credit. As part of that process I had to get an an appraisal done. That appraisal valued my home for much higher than even the latest B.C. assesement numbers.
Considering the Impact on Net Worth
So how should I apply all of these numbers to my net worth?
As you may know, last year I wrote about Hitting the Real Estate Jackpot and decided to use a rolling average of 3 property assessments to account for my home’s appreciation in my net worth.
But this year it doesn’t seem correct to use that strategy since B.C. Assessment themselves have admitted that this year’s assessment is totally inaccurate. If I were to follow my averaging strategy, my net worth would be up $145k compared to last year—totally unrealistic.
So for that reason, I’m punting. For this year, I will simply ignore this elevated B.C. Assessment number and continue using my home’s value of $979k that I calculated last year.
Looking Ahead to Next Year
Now, what about next year?
Well, unless something changes dramatically in 2023, it looks like housing will continue to face headwinds. And because of the overinflated 2023 assessment, it seems likely that the 2024 assessment will see a huge decrease.
Assuming the 2024 assessment comes in at $950k, I would include that in the average with my 2022 and 2021 assessments. That would give me an estimated home value of $1,009k, which is just a slight increase compared to the $979k value I’m using today.
Thanks for Reading
Interested in home ownership? I recently wrote a few articles that you may be interested in. This includes my guide on closing costs in Canada and my how-to article on getting cash back from your realtor! Consider giving those a read if you think they’ll help you on your financial journey!
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