So as you’ve heard by now, property assessments are out in BC. Here in Victoria that brought increases nearly across the board. I’d link to a local news story about it, but they were all contentless garbage this year. BC Assessment has their summary of Vancouver Island assessment changes and you can look up individual properties on eValueBC.
If you have a house in the core, chances are your assessment is significantly up. Now before you succumb to the wealth effect and buy a sixpack of tablets, consider if that really makes a lick of difference.
Sure your house increasing in value increases your net worth, but that’s just a number with no real world impact, and it’s rude to talk about to boot. If you upgrade, downgrade or sidegrade your house in Victoria, an increase in value does nothing for you other than making the transaction more expensive. You could cash in and move to Tumbler Ridge, but really, will you? Yeah me neither. Unless you’re a real estate investor, the market value of your home is largely immaterial.
So what is the value? Well without getting into the exquisite homeowner-only pleasure of painting your wall a slightly different shade of beige on a Sunday, a house can be equivalently rented. So the value of a purchased house is actually set by the rent on an equivalent accommodation, or the imputed rent, minus the additional ownership costs.
I turn this into home value by considering what amount of invested money would be necessary to pay the rent on the equivalent place. For example,we paid $1800 to rent our previous house, which is now assessed at $523,000. The annual rent of $21,600 minus at least $5000 in ownership-only costs gives an annual rental value of $16,600. To generate that amount requires a $415,000 portfolio of invested assets using a 4% Safe Withdrawal Rate.
The practical value of your house is dictated not by the housing market, but by the rental market
So the value in your home is really about how much rent you can replace by purchasing it. Which means even if you own, the practical value of your house goes up with rising rents. And the return on your investment is reduced when you pay down your mortgage!
Want to know what your house is really worth? Just use the simplistic calculator below.
|Practical House Value Calculator|
|What would your house rent for?|