Truly a classic from 2008. Are houses an investment, or are they merely somewhere where you lay your hat? Given the housing market in Ottawa, it has now more than doubled in value. Still where I lay my hat.
Is my house more valuable than the day I bought it about nine years ago? That is not a bad investment. I base this all on the wacky assessment notice that I got from MPAC . I don’t actually believe the evaluation is a fundamental value that I would get if I sold my house (without taking into consideration all of the associated costs with selling a home). However, it is an exciting number to start with.
The actual evaluation will not be implemented right away. It will be gradually raised until 2012 when this value will be in place, which is more interesting, since if the housing market in Ottawa remains robust, my house may be worth even more by then? Maybe not, but it is something else to consider in this wacky equation.
Does this mean I will be paying more property taxes? Given that my evaluation has gone up about 11% from the assessment I had in 2005, I think my property taxes will not go up that much in reference to this evaluation, however, my guess is other charges from the City of Ottawa will increase my property taxes by a fair amount this coming year. My first property tax bill arrives sometime in January.
Percentage of Home Ownership
If I am to assume that this evaluation is relatively close to what the market will pay for my house, it does change how much (as a percentage) of my house that I own. Figuring out how much I still owe on my property, I actually own about 60% of my house currently, which is a reassuring feeling, however, it’s not like I can jettison 40% of the house and thus be out of debt.
The other problem is, all other houses around me are appreciating as well, so the value of my home as an investment is not that great, in that it is unlikely I will move out of it and into a much cheaper house soon.
Gas Below 90 cents a Liter
Speaking of wacky, gas dropped below 90 cents a liter for a while in Ottawa, which is very interesting. The Canadian Dollar has swung like a pendulum, but now with lower gas prices, suddenly, travelling becomes much cheaper than it was going to be six months ago. Will gas prices stay down? Don’t know, but it’s nice to see for now, as it makes running my cars (and snow blower) much cheaper right now.
Stocks Still Dropping
The world continues to be jittery about stocks, and they continue to drop in value for now. Rate cuts continue in most countries trying to stimulate spending, but a lot of folks are just worried and are going to keep their money in their wallets for now, until they are sure their jobs are safe.
More Job Cuts
Rumour has it that my former employer will soon be adding to the employment pool by laying off another 18% of their workforce (I have heard, this is an unsubstantiated rumour), which will make looking for jobs in Ottawa that much more complicated. Not all the job losses will be in Ottawa, but there continues to be a steady flow out.
we bought our house this June and our MPAC assessment as of January 2008 says it’s worth $10k more than we paid for it! I know it means nothing (the house is only worth what we could sell it for), but we still sighed with relief 🙂 It took the edge off the $25k of improvements we’ve already put in 🙂 (new roof, new super-high-eff furance, new bathroom, new energy star windows)
Although the world is, as you say, jittery about the stock market and the Canadain dollar is swinging, I think it would be an interesting time to think about a career in finance. With great schools (like Centennial College in Toronto) right across Canada offering programs in financial services and business maybe what we need is a younger pool of grads to lead the financial world in a different way.
Canadian Tax Resource – You “wondered myself if my property taxes would increase by the amount my house increased.” The short answer is no. I explain how this works in a recent article: link
C8j – You wondered how much your property taxes would go up. Your assessment went up by 2% less than average. Spread over 4 years this is just 0.5% less than average in the first year. So, once the city decides how much the average property tax increase will be, you can knock 0.5% off it to get your tax increase.
C8j – I was a little surprised at my MPAC assessment as well. Although I’ve only need in my current house for a little more than a year the value was boosted significantly.
As for the 67% increase. Remember that is the total increase. If we pipe that into a financial calculator it translates to a 5.86% annual increase. Since your home is presumably your principal residence, that return is after tax.
Now if we assume that your marginal tax rate is 45%, in order to generate the same after tax return on an investment, the investment would need to generate 10.65% annually.
It would appear that the value of your home, on an after tax basis increased somewhat consistently with the market…But how much have you spent on maintenance (new roof, siding, windows, applicances, floor, renovations)?
I do feel that it always makes sense to own your home. I always questioned those who “invest” in rental real estate. I’ve never personally been able to come up with a financial reason to do so.
On the property tax question. I wondered myself if my property taxes would increase by the amount my house increased. But does the city really require or deserve that much of an increase?