Let's Talk Property Tax - Sale Price vs Property Assessment

Location: GTA

Property type: Warehouse

Building size: 145,285 sf

In early 2024, the owner acquired the property for $13,000,000. Upon reviewing their 2024 property assessment of $9,464,000, they observed the variance but found reassurance in the comparatively lower assessment. For this reason, they believed their assessment was favorable and did not seek to employ a professional review. This misconception is widespread and stems from the complex nature of the current and ongoing status of Ontario's assessment regime, not the fault of the property owner (or tenant).

While the 2024 purchase price might be a reliable indicator of current market value, it might not strongly influence the assessed value in the current assessment cycle. In Ontario, 2024 property assessments remain to be based off a market valuation date of January 1, 2016. To grasp the reasonableness of the property assessment, we need to revisit 2016 in our time machine.

When doing this, we observed 4 strong comparable property sale transactions that occurred in 2016, all of which included properties with similar location, building size, site area, and year built. After making necessary adjustments to accommodate for minor differences, we determined an average sale price per square foot of $57.84.

With this analysis, we can recalculate the 2024 assessment to be $8,403,000, by multiplying the building size of the subject property (145,285 square feet), by the determined average sale price per square foot of the comparable properties ($57.84). This assessment reduction provides an estimated +$20,000 in total property tax savings/avoidance for the 2024 tax year. While this may seem modest, if this assessment reduction had occurred in the first year of the assessment cycle (2017), the total savings/avoidance would have increased to an estimated $160,000 for the entire 2017-2024 assessment cycle.

Let's face it, property tax isn't exactly the life of the party conversation. But guess what? It can be! The only challenge is understanding your property assessment, its inner workings, and knowing your action options. If you're up for a chat or have any burning questions of your own, drop me a message. Who knows, you might be sitting on property tax savings that you can inject back into your business!

-EP