Homeowners across Muskoka should get ready to feel the pinch when 2008 property assessments are mailed out this fall, says a new study released by Waterfront Ratepayers After Fair Taxation (WRAFT).

The study, conducted for WRAFT by real estate firm Cushman Wakefield Lepage (CWL), looks at the median resale values of residential properties over the past three years in the Greater Toronto Area (GTA) and the Muskoka, Almaguin and Haliburton regions. Using data collected from the Toronto Real Estate Board and the Muskoka & Haliburton Association of Realtors, the study compares real estate sale prices with 2005 CVAs (current value assessment) in order to predict 2008 assessments.

The CWL study indicates that because assessments were frozen in 2005, major increases — as much as 154 per cent — could be in store for some Muskoka home and cottage owners.

According to the report, on average, median price increases for waterfront properties jumped 47 per cent from the third quarter of 2004, just prior to the last assessment cycle, to the third quarter of 2007.

In municipalities like Muskoka Lakes, the difference between 2005 CVAs and 2007 sale prices for some individual properties was 133 per cent. In Dwight, one property was seen to have a 154 per cent disparity.

On average, the study indicates that waterfront homeowners in Muskoka and Haliburton could see a 45 per cent increase in assessments.

Non-waterfront property owners could see their assessments increase on average by 28 per cent, the study predicted.

While median sale prices are not recognized as an accurate indicator of assessments because higher sale prices can distort averages, homeowners can draw their own conclusions from the study, said Bob Topp, chair of the Coalition After Property Tax Reform (CAPTR).

“I don’t think there’s much question as to what’s going to happen this fall,” Topp said.

The huge disparities between individual property sale prices and their corresponding CVAs demonstrate the problems within the current property tax system, he argued.

“The comparisons suggest to us that the assessments are not accurate,” Topp said.

When asked to comment on WRAFT’s study, Jane Davidson, media relations specialist for Municipal Property Assessment Corporation (MPAC), said comparing real estate sales with CVAs is difficult.

“There’s often a difference between the current (assessed) value and the actual sale price because the sale price only shows how much money a buyer and seller agreed to in a particular transaction,” Davidson said. “For example, 10 people could buy an almost identical house at the exact same time and still have different sale prices. What we measure is sort of in the middle of those sale prices.”

MPAC, she said, looks at five key factors, including the location, size of a dwelling and its living area when determining residential assessments. Major renovations and the quality of a home’s construction are also examined.

Properties are also assessed as of Jan. 1, meaning a home’s value may change throughout the year.

“It’s a very complex process,” said Davidson.” We don’t just do it arbitrarily. There’s a great deal of examination.”

Davidson acknowledged recent criticism of MPAC procedures, but said the corporation is working hard to improve its way of doing business. Assessments will now be conducted every four years, with increases phased in over that time so as to provide more stability for homeowners. The corporation is also conducting more property inspections and keeping track of all changes to assessed values in order to keep its database up-to-date, she said.

MPAC’s appeals process is also undergoing reforms.

Rose McLean, director of legal and policy supports for MPAC, said the “reverse onus” system recommended by the ombudsman in 2006 should be in place for the 2009 taxation year.

The system would require MPAC to prove the accuracy of its assessments when challenged by property owners.

“We’re trying to be as responsive as possible to the criticism we’ve received and we’re really clear that our key number one customer is the property tax payer,” Davidson said.

Nevertheless, both CAPTR and WRAFT are continuing to push for more reforms to the system. Topp said the four-year assessment cycle is an improvement, but still does not get to the root of the problem.

“To put it in simple terms, the real estate market in Ontario is haywire,” Topp said. “The assessment system is faulty, and if you’re one of the unlucky homeowners, you’re getting wounded in the crossfire.”

Both CAPTR and WRAFT favour capping assessment increases at around five per cent per year, he said.