Due to Montreal’s active real-estate market, property value keeps on rising. Since it is the year of the city assessment, municipal taxes have increased exponentially this year, like every 3 years. This is a burden carried by taxpayers that are always asked to pay the total in 2 payments only.
Each year, property owners must pay property taxes, also known as municipal taxes. They are based on the value of your property and of the land which are set by the property assessment. They are used to pay all services you are benefiting from (sewage treatment) as well as paying your debt to the city. As it is the primary income for municipalities, the rate is adjusted each year to balance their budget.
Tax rate
The applicable rate depends on a year to another and is different depending on the building types (residential building with 5 apartments or fewer, buildings of over 5 apartments, non-residential building, etc.).
For example: in 2020 a residential building of 5 units or less in Ahuntsic-Cartierville will be $0.8393 for each $100 in the property assessment, compared to $0.8507 in 2019 and $0.8611 in 2018. Here are the details for Ahuntsic-Cartierville in 2020.
Please know that the property value is reassessed once every 3 years and is adjusted annually.
Payment of Municipal Taxes
You can make a single payment at the end of February/beginning of March or choose to pay in 2 equal instalments if the total tax amount is greater than $300. The first payment takes place at the end of February/beginning of March and the second at the end of May/beginning of June.
The city of Montreal mentions the possibility of paying in 6 or 11 instalments but with interest and penalty charges that are more than 10% of the amount of the tax.
Property values are on the rise
Given the current dynamics of the Montreal real estate market, property prices have increased exponentially over the past two years (+9% of the median price in 2019 for single-family homes in Ahuntsic). This leads to a sharp increase in property values and therefore municipal assessments which have just been re-calculated for the next 3 years.
For example, a house in Ahuntsic had a taxable value of $456,000 in 2019 on its property assessment (municipal assessment made based in 2017). This new assessed value is $672,700 for 2020.
Imagine the impact on municipal taxes…
The owners of this house had to pay $3,920 in taxes in 2019 versus $5,633 in 2020, an increase of $1,713 in one year.
Let’s also take the example of a commercial building… Non-residential buildings have much higher tax rates. For the same neighborhood, in Ahuntsic-Cartierville, this rate is $3.1148 per $100 of assessment in 2020 for buildings whose value does not exceed $625,000 and $3.6375 for the portion of the value exceeds $625,000. Let’s imagine a commercial building of the same value as the house in the first example in 2020, namely $672,700. Municipal taxes would be $21,203. And all to be paid in just 2 instalments, each instalment of almost $10,601.5. It’s huge… It can be a real source of stress to have to take out such amounts.
A Rise in Welcome Taxes Made on the Sly
In its last budget tabled on November 25, the city of Montreal secretly increased transfer duties, better known as “welcome taxes,” for properties worth more than $2 million. The city justifies this increase by the desire to discourage speculation and protect accessibility to housing and commercial premises. It’s a disguised way for the city to take advantage of the real estate boom and increase its revenue by $10.4 million in 2020.
Since the proportion of buildings over $2 million is higher for non-residential than residential, this new increase will have a greater impact on the non-residential sector, which is already one of the highest taxed in Canada. Let’s take a building with 25 apartments paid 3 million. In 2019, its owner reportedly paid $65,843 in welcome taxes. In 2020, this amount will be $70,692, almost $5,000 more.
In the non-residential sector, this increase will directly impact the cost of purchasing a building, so it will also impact the rents demanded by the new owner. Thus, this increase will have repercussions on the rents of small traders…
A tax burden, increasingly difficult to bear.
An outdated system
With such increases, it’s not normal to still must pay this amount in just 2 instalments… That’s a lot of money to take out all at once. We must find a new way to make this more “liveable” for Quebec households. Especially since municipal taxes are only increasing, but services do not necessarily follow… In the end, we pay more but we have fewer services. It’s time for that to change!
It would be necessary to be able to make monthly payments, without having penalties of 10% for late payment… That would be a win-win. Taxpayers would be relieved because it would represent less money to go out all at once and municipalities would have money coming in monthly and this would allow them to smooth their budget.
We should at least imagine the possibility of making quarterly payments, spread over 4 equal payments. Quebec City has just launched this initiative, and I think a lot of households will be relieved. But then why has the city of Montreal not yet followed suit? While it is the city with the highest increases in property values… It is really time to change the system to make it more in line with current market conditions…
Want to learn more about the real estate market, check out my blog.
