This Coldstream home is listed for sale at almost $15 million but assessed at only $6.6 million.

Image Credit: Engel & Volkers Okanagan

Some of the most expensive properties in the Okanagan are currently on the market with listing prices far above the value of the home as it was assessed for taxes — meaning many of their less well-heeled neighbours are picking up more than their fair share of residential taxes.

While it's not unusual for a home's assessed value to be a little out of whack with a market price, several high-end multi-million dollar Okanagan homes are currently listed at twice the price that B.C. Assessment states they are worth.

The assessed value stipulates how much property tax a person pays so having an assessed value lower than the property is actually worth brings the obvious advantage of a reduced tax bill for the homeowner.

However, there are repercussions for the rest of us.

"Other people are paying a higher rate than they would otherwise, to counteract that person's lower rate," UBC Sauder School of Business associate professor Tsur Somerville told iNFOnews.ca. "If I'm underestimating other people's values then the people whose values are not being underestimated end up paying more."

Simply stated, the average homeowner is subsidizing those living in multi-million dollar houses.

"The folks that have the wherewithal are the people who should not be getting off the hook," Somerville said.

It's difficult to gauge how many people are paying property tax bills that are substantially lower than they should be, but there are multiple examples.

The most extreme instance is a Lake Country property on 12391 Pixton Road. It's assessed at $5.2 million and currently listed for 10 times that at $55-million.

Another glaring example is 133 Ravine Drive, Coldstream, listed for $15 million but with an assessed value at $6.6 million.

READ MORE: IN VIDEO: This Lake Country home could be the most expensive in the B.C. Interior

One lakefront home at 8485 Okanagan Landing Road in Vernon is currently on the market for $3,749,000, twice that of its $1.8 million assessed value. Based on the 2020. rate this would see the homeowner pay $11,336 in tax at the assessed value, instead of $23,617 closer to the market value.

Further down the lake in Kelowna, 836 Manhattan Drive is listed for $3 million but has an assessed value of nearly half that at $1.6 million.

Another Coldstream home was assessed for $4 million and listed for $6 million – a 50 per cent difference. Another Vernon home was assessed at $3 million and is listed at $4.4 million. One Kelowna home is on the market for 40 per cent higher than its assessed value of $1.8 million listed for $2.6 million. A recently constructed lakeside home in Vernon is on the market for $2.6 million having been assessed at just over $1-million.

READ MORE: Three homes in Central Okanagan are worth more than $10M

While this anomaly creates lower property tax bills for a lucky few, cities and municipalities aren’t losing out on tax revenue.

“It doesn't affect what we do... we work backwards. We say we need this much money, and then we work backwards to calculate the rates,” City of Vernon financial services director Debra Law said.

Law said the tax bills residents get in the mail in January is only the initial assessment and the city will receive a revised figure in the spring. The new figure will account for those people who appealed their assessments (or had a neighbour do so). A high assessment successfully reduced on appeal can affect the city’s budget, and really complex cases may take two or three years, she said.

Unsurprisingly, appealing an assessment for being too low, isn’t something the finance director ever sees and the city doesn’t take the time to launch appeals.

“We don’t get involved in the assessment amount for residential property,” Law said.

It’s worth remembering the listing price has nothing to do with how much a house will ultimately sell for, but the differences in the figures and the amount of examples suggests this anomaly isn’t simply created by sellers and realtors with unrealistic expectations.

Vernon Royal LePage realtor John Deak has been selling real estate for more than a decade and said generally there will always be some difference between the assessed value and what he can sell a house for.

“Typically we'll see a neighbourhood selling at about 10 per cent over (the) assessed value,” he said.

But Deak, who doesn’t sell multi-million dollar properties, said seeing assessed values that are a fraction of the listing price isn’t the norm for most average day-to-day properties.

READ MORE: High demand for real estate in Okanagan, Shuswap in 2020

Finding out why some higher-end properties are listed for sale at prices with little correlation to their assessed value is no easy feat.

According to B.C. Assessment, there are several reasons that discrepancies come about.

B.C. Assessment spokesperson Tracey Wall said a property may be listed for more than the assessed value because of renovations and upgrades the homeowner may have made. As B.C. Assessment doesn’t physically visit each home and bases the value on what properties in the area have sold for, significant upgrades can play a large part.

Having a property in the farm classification, whereby the owner has to prove the land is used for farming, can also greatly reduce a home's assessed value.

Wall also reiterated that the assessed value released at the beginning of January is based on the market value six months earlier on July 1, and the market is fluid and changes.

In theory, this would make a difference.

Deak said following a housing slump at the beginning of 2020 due to the pandemic, sales got moving again in mid-June. He said the market has been hot ever since.

According to the Association of Interior Realtors, prices rose in the Central and North Okanagan by 13 and 12 respectively, in 2020 over 2019.

This may explain why evaluations done on July 1, 2020, are different from listings and sale prices today.

However, those figures don’t support the 40 to 100 per cent value differences shown in these high-end properties.

READ MORE: Small communities in Thompson-Okanagan saw big increases in property assessments

One explanation for the price discrepancy is that because so few high-end properties sell, there is far less data that is needed to work out the assessment value. A downtown street of condos, townhouses, and single-family homes will have a high turnover of ownership giving B.C Assessment lots of sales history data to work with. There are far fewer multi-million dollar lakeside mansions, a fraction of the sales, and fewer numbers to work with.

How much of an issue this is, is hard to quantify.

Somerville said on a global scale, multi-million homeowners not paying their fair share of tax is and would be, a big deal. But on the local level in the Okanagan, that’s not necessarily true. The small numbers involved means it’s only costing the remaining taxpayers a few dollars each.

However, the associate business professor does say while B.C. Assessment is considered to be among the best in Canada, it’s important they provide accurate numbers.

“It’s still important to get to it right because it’s unfair, and fairness is really important,” he said.

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