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Altus Group research finds commercial tax rates 3x higher than residential in more than half of cities surveyed

For real estate investors property taxes are an expected cost, but for those focused on commercial real estate the outsized tax burden may be a shock.

New research from Altus Group looked at 11 Canadian cities to discover the differential in property taxes between residential and commercial properties and found that commercial tax rates were more than 3x higher than residential in more than half of the cities surveyed.

The average commercial-to-residential tax ratio has increased by almost 12% in the last 20 years, and in 2023 was 2.82, reflecting a slight increase of 0.84% from the 2022 average ratio of 2.80.

Calgary (9.5%), Montreal (6%), Halifax (1.3%), and Quebec City (1.2%) saw the largest rises while the biggest decreases were in Edmonton (-3.5%), Toronto (-3%), Vancouver (-2.3%), and Regina (0.07%), at least in part driven by higher home values.

Montreal leads the nation with a commercial-to-residential tax ratio of 4.33, meaning taxes are 4.21x higher for commercial properties. Regina has the lowest ratio at 1.50.

"In today's rapidly changing commercial real estate environment, it is crucial for governments to take a proactive approach in addressing shifts in property values while maintaining tax fairness for both commercial and residential property owners. said Ryan Fagan, head of Operations & Technology, Tax Canada at Altus Group.

Out of date

Ontario’s tax assessments are nearly nine years out of date, creating a massive financial inequity issue and unpredictable tax burdens for commercial and residential property owners.

“Jurisdictions such as Ontario need to consider more frequent property reassessments to align with market dynamics,” added Fagan.

Source: Wealth Professional