Investment, Science, and Technology Division
Table of Contents
- Introduction
- Key definitions
- Input data
- Auxiliary Data
- Classification
- Imputation for missing data
- Price adjustments
- Volume adjustments
- Removals and adjustments in accordance with typical property assessment and taxation practices
- Removal of CSDs on account of First Nations and other Aboriginal Groups
- Exclusion of exempt residential property
- Exclusions of schools, churches and hospitals
- Removal of properties subject to provincial-territorial and municipal payments-in-lieu of taxes
- Adjustments in the Northwest Territories and Nunavut
- Removal of machinery and equipment values in Alberta, Northwest Territories and Nunavut
- Removal of personal property values in Manitoba
- Mixed-use properties
- Quality control
Annex 1. List of CSD types representing First Nations and other Aboriginal Groups
Annex 2. List of Provinces and Territories with Microdata in tax year 2021
1. Introduction
The Property Values Program produces annual estimates of assessment values of properties at current prices across Canada. Finance Canada uses these estimates to determine fiscal capacity with respect to property taxes for the Equalization program and the Territorial Formula Financing (TFF) program. Footnote 1 In order to ensure comparability of the data, a number of adjustments are made, including: coding property categories to a common classification; adjusting to a common price base date and volume state (or stock) date; and imputation of missing property values in some areas. Additionally, other removals and adjustments are carried out in order to produce estimates of assessment values at current price that meet the requirements to determine fiscal capacity.
This document presents these adjustments in more detail.
2. Key definitions
a. Price base date Footnote 2
The price base date (also called the valuation date) corresponds to a fixed point in time as of when a property is valued.
b. Volume state date
The volume state date is the fixed point in time as of when the stock of properties is recorded, which also corresponds to the date where all properties are represented in an assessment roll data file.
c. Residential property
Defined as all types of property categorized as residential for assessment purposes in the majority of provinces and territories. It includes single and multi-unit properties, farm residences, cottages and vacation homes, mobile homes, and vacant lands which are lawfully usable for residential purposes.
d. Non-residential property
Defined as all types of property categorized as non-residential for assessment purposes in the majority of provinces and territories. It includes industrial, commercial and institutional properties, engineering construction and mining properties, and vacant lands which are lawfully usable for non-residential purposes.
Agricultural properties Footnote 3 (not including farm residences, which are part of residential property) as well as machinery and equipment properties are excluded from final estimates.
e. Properties subject to municipal, provincial, territorial and federal payment-in-lieu
Defined as municipal, provincial, territorial and federal government-owned property for which owners remit payment-in-lieu of tax to municipal governments or local taxation authorities for receiving municipal services. A payment-in-lieu of taxes is made to compensate a local government for some or all of the tax revenue that it loses because of the nature of the ownership or use of a particular piece of real property. Usually, no property tax is collected for buildings owned by government.
3. Input data
a. Data sources
Assessment data are collected from provincial, territorial and municipal assessment entities and are based on municipal assessment rolls. Data providers agree to provide the data on a regular basis either through formal agreements or responding per data request.
Starting in January 2018, assessment roll microdata is gradually being received from every jurisdiction, to replace the use of assessment roll aggregate data. See Annex 2.
b. Unit reported
Data are reported either at the municipality level, or at property or sub-property level.
4. Auxiliary Data
a. Multiple Listing Service data
Multiple Listing Service (MLS) data are produced by the Canadian Real Estate Association (CREA). The data are obtained via Haver Analytics, a company that is the sole distributer of CREA MLS data. MLS data are for resale homes and are comprised of dollar volume sales and number of units sold by real estate board. Data are available for all provinces and territories with the exception of Québec and Nunavut.
b. Building permit and investment in construction data
Data on the number of residential and non-residential building permits issued, investment in construction completion, by type of work (e.g., new unit, conversion, etc.), is obtained from Statistics Canada's Building and Demolition Permits (BDP) and Investment programs. The data are produced monthly, by jurisdiction.
c. Census of Population
Data from Census of population are available every five years. Between census years, yearly values, referred to as "Intercensal" values, are derived using linear interpolation. Footnote 4 These values are used at various stages of the production cycle such as for the imputation of missing values and for the estimation of farm residences.
d. Census of Agriculture
Similar to the Census of population, data from Census of Agriculture are available every five years. Yearly values ("Intercensal" values) are also derived using linear interpolation and used during the production cycle. Census of Agriculture values are used to estimate the values of farm residences in Ontario, Saskatchewan and British Columbia, provinces where such values are embedded in totals or are missing.
e. List of CSDs from the Data Integration Infrastructure Division
The list of Census Subdivisions (CSD) is produced, maintained and updated annually by the Data Integration Infrastructure Division at Statistics Canada.
5. Classification
a. Geography
The municipalities covered by the collected data are assigned to Census Subdivisions (CSDs) updated annually by Statistics Canada's Data Integration Infrastructure Division, using the Standard Geographical Classification system. The assignment of CSDs is revised yearly to reflect changes (municipal amalgamations, legal status changes, etc.) that occur during the year.
CSDs containing First Nations or other autonomous or self-governing areas are out of scope for Fiscal Arrangements purposes (see Annex 1); consequently, estimates are not produced for these CSDs.
b. Type of Property
The Type of Property Classification was reviewed to improve comparability of the data amongst provinces and territories. The classification of properties is more precise when more details are available in the data.
6. Imputation for missing data
There exist municipalities or regions that are not assessed by provincial or territorial assessment bodies, and therefore no property taxes are levied. As a result, assessment values are missing for some jurisdictions, mostly in unorganized areas. Footnote 5 Additionally, on occasion, some municipalities submit their assessment values to assessment bodies later than when the data are required. Missing property assessment values for these municipalities are imputed.
For taxation year 2021, there were 148 jurisdictions with missing data that were imputed, 138 of which were in Newfoundland-and-Labrador, 8 were in Northwest Territories and 2 were in Saskatchewan.
a. Imputation of residential values
The imputed residential value for a CSD is calculated by multiplying the number of private dwellings by the average value of owner-occupied dwellings for the CSD from the intercensal Census of Population file.
In order to produce an imputed value that best reflects the desired price base and volume state dates:
- the number of private dwellings value is taken from the yearly intercensal file of the same year as the volume state date of the raw file; and
- the average value of owner-occupied dwellings is taken from the yearly intercensal file or derived from assessed values of the same year as the price base date of the raw file.
The resulting imputed values are then processed and adjusted Footnote 6 using the same methodology as for raw values.
b. Imputation of non-residential values
Unlike the imputation for residential property values where dwelling values from intercensal files can be used to estimate the value of residential properties, no similar direct indicator is available for non-residential properties. Therefore, non-residential values are imputed using data of CSDs with similar Census population counts within the same province or territory.
Ratios of the total non-residential values over the total population are calculated using data from CSDs for each population class (see table 1 below) for each province and territory. These ratios Footnote 7 are then applied to the population count of the missing CSD to derive the imputed non-residential value. Most of the missing CSDs are from rural areas.
| Population Class | Description |
|---|---|
| 1 | Rural |
| 2 | Small Sized Municipalities |
| 3 | Medium Sized Municipalities |
| 4 | Large Sized Municipalities |
7. Price adjustments
Due to differences in assessment practices and frequency of revaluation practices, data received do not always align with the target price base date of July 1 of the year preceding the taxation year.
a. Choice of Source Data Vintage
In order to minimize price adjustments, the data from the file whose price base date most closely aligns with the target price base date is used to produce the estimates of a given taxation year. In the event that two input files have the same time interval between their price base date and the target price base date, the file with the closest volume state date is selected.
b. Jurisdictions that are not price adjusted
The following provinces do not undergo price adjustments since their price base date corresponds to the desired target price base dates:
- Quebec
- Alberta
- British Columbia
c. Residential Price adjustment
i. Modelling of residential assessment data
MLS resale values are used in the reassessment of properties by assessment agencies, however they are not the only information that are used. Other information such as demolition/construction permits, renovation permits, construction costs, and other indicators are used in their complex modelling methodology. Also, MLS resale values are a subset of all residential property values as they exclude private sales as well as properties that have not sold in many years. By consequence, although they are a good indicator, MLS resale values do not always closely follow assessment values price movements.
Statistics Canada does not attempt to replicate the complex modelling of assessment agencies, but rather favours the use of price indices to price adjust assessment values to the target price base date.
For certain provinces, reassessments occur yearly or on a frequent basis and the target price base date is close to the price base date of the data received. To make better use of the assessment data collected since the onset of this program and to improve the quality of estimates, a price index is generated by calculating the polynomial trendFootnote 9 of average values by property classes. Using average values excludes the effect due to yearly changes in volume (new construction and demolition) and help isolate price movements. Such an index is called Assessment Roll Trend (AR Trend). This modelling is performed at the provincial level.
This method is used in the following provinces:
- Newfoundland
- Prince Edward Island
- Nova Scotia
- New Brunswick
ii. Modelling of MLS monthly resale values
For remaining provinces and territories (except Nunavut), in order to represent yearly price movements, a price index is generated by calculating the polynomial trend of seasonally adjusted MLS monthly average resale values. These polynomial trend series are calculated by MLS jurisdiction and applied by CSD.
This method is used in the following provinces and territories:
- Ontario
- Manitoba
- Saskatchewan
- Yukon
- Northwest Territories
iii. Residential price index for Nunavut
As resale data do not exist for Nunavut, Statistics Canada uses data for the region of northern Quebec Footnote 10 as a proxy for this territory. Footnote 11 The property assessment data are provided by the provincial Government of Quebec.
The Nunavut residential index is calculated using an unweighted average of residential and non-residential property values reported. Footnote 12
An annual series is generated and converted into a monthly series by adding one twelfth of the dollar difference between two observations to each successive month between observed values (linear interpolation), creating a monthly index. Residential price-adjustments are then applied to Nunavut property values using the same algorithm (for ratios) designed for resale data.
d. Non-residential price adjustment
Unlike residential properties, non-residential properties (more specifically industrial, commercial, and industrial (ICI)) are not often for sale. It is therefore comparatively more difficult to find appropriate market indicators to use for non-residential price adjustment. To overcome this, the correlation between residential and non-residential price changes was analysed.
A regression analysis was performed, and a model was constructed using assessment data from four provinces: Prince Edward Island, New Brunswick, Quebec, and British Columbia. The reasons for using these specific four provinces are twofold: (1) these provinces evaluate their property stock on an annual basis Footnote 13 and (2) they report data for both assessment values and numbers of properties. This level of detail allowed the derivation of the annual non-residential price movements. The conclusion was to use the model coefficient of 0.73336 as a discount factor to the residential series.
The Discount Factor methodology was satisfactory for several years, while MLS resale values observed a constant behaviour compared to non-residential values. However, over the last 3 years, the correlation between residential and non-residential values became weaker. This combined with the fact that assessment data was collected since 2006, it became realistic to favour the development of the Polynomial Trend of Assessment Data (AR Trend) methodology to replace the Discount Factor methodology, where possible.
i. Modelling of residential assessment data
Similar to the modelling of residential assessment data, non-residential assessment data is modelled using polynomial trend of average values by broad property types.
This method is used in:
- Newfoundland (provincial level)
- Prince Edward Island (provincial level)
- Nova Scotia (provincial level)
- New Brunswick (provincial level)
- Ontario (separate modelling for Toronto and rest of province)
- Manitoba (separate modelling for Winnipeg and rest of province)
ii. Discount Factor applied to MLS Polynomial Trend series
For remaining provinces and territories (except Nunavut), it is not possible to model the assessment data as the reassessments cycle is long and there is not yet enough source data for modelling. In these cases, the discount factor is applied to the MLS polynomial trend series to price adjust the non-residential property values. In future, it may become possible to update this methodology, as more assessment data is received.
This method is used in:
- Saskatchewan
- Yukon
- Northwest Territories
iii. Discount factor applied to Nunavut price index
Similarly, the discount factor is applied to the Nunavut residential price index.
e. Calculating the price adjusted value
The price adjustment ratio is calculated by taking the value of the index value representing the month of the target price date over the index value for the month of the price base date of the source data. This price adjustment ratio is then applied to the assessment value to yield the adjusted value.
8. Volume adjustments
Volume adjustments ensure that properties reflect a common volume state date of January 1st of the taxation year. For assessment data that reflects a volume state date earlier or later than the target volume state date, the value of all completed construction that occurred in the period between the two dates is estimated using Statistics Canada's monthly Building and Demolition Permits (BDP) Program or from the Investment Program and then added or subtracted, as the case may be, from the total property values. This methodology is used for both residential and non-residential property values.
a. Residential volume adjustments
For residential properties, the volume adjustment is calculated by estimating the construction that was completed in between the volume state date and the target volume state date using the investment in construction completion values.
Construction completion values represent the total investment in construction available upon completion of construction. Monthly values that fall between the volume state date and the target volume state date are summed for an estimated total volume adjustment for the period. Residential volume adjustments account for approximately 2% of total values.
b. Non-residential volume adjustments
As for residential volume adjustments, non-residential investment in construction completion values are used in the calculations of volume adjustments. Non-residential volume adjustments account for approximately 2% of total values.
9. Removals and adjustments in accordance with typical property assessment and taxation practices
a. Removal of CSDs on account of First Nations and other Aboriginal Groups
Census subdivisions containing First Nations reserves, and autonomous or self-governing areas are removed as they are deemed out of scope. Such CSDs are identified based on their CSD type.Footnote 14
b. Exclusion of exempt residential property
In some provinces, certain properties are identified as exempt from property taxes as presented in the input files received from the assessment bodies. Any value associated with these properties are excluded from estimates for the purposes of fiscal arrangements.
c. Exclusions of schools, churches and hospitals
The most important non-residential properties which are generally exempt from property taxes are schools, churches and hospitals (S/C/H).
Some provinces and territories provide detailed breakdowns of S/C/H in their assessment data. For these provinces and territories, the exact proportion of S/C/H is removed from the final estimates.
For provinces and territories where the S/C/H breakdowns are not available, the proportion of the S/C/H assessment values relative to total assessment values for non-residential properties is estimated by calculating and applying the proportion of S/C/H property values from a similar reporting province or territory. It should be noted that values for engineering and mining properties are excluded from the total assessment value for non-residential properties used in the calculation of the S/C/H proportions.
The list of provinces and territories used in the calculation of estimated S/C/H proportion depends on data availability and can change from one year to the next as microdata is received.
d. Removal of properties subject to provincial-territorial and municipal payments-in-lieu of taxes
Instead of regular property taxes, federal, provincial or municipal government usually remit a payment in lieu of taxes (PILT) for their exempt properties. However, only federal PILT property represents fiscal capacity for the consolidated provincial-territorial-municipal-local sector; provincial, territorial and municipal (PTM) PILT properties are excluded.
When breakdowns of values of PILT properties are not available, as is the case for a number of provinces and territories, these values are estimated. The estimation of PM-PILT values takes into account the S/C/H values, some of which are also PTM-PILT properties, which have already been removed. Only the "remaining" PILT values are estimated and removed.
Although the estimation methodology using aggregate assessment roll data is successful in estimating the remaining proportion to remove, the arrival of assessment roll microdata allows for a more precise estimation of remaining PILT proportions to remove.
e. Adjustments in the Northwest Territories and Nunavut
Unlike in provinces and the Yukon, property assessments in the Northwest Territories and Nunavut do not consistently follow market value standards.
Land values within the municipal taxation areas (Iqaluit in Nunavut; Yellowknife, Fort Simpson, Fort Smith, Hay River, Norman Wells and Inuvik in NWT), reflect full market value, while land values in the remainder of the two territories (i.e. in the General Taxation Areas) are, according to the data provider, based on average regional development costs.
Improvements (i.e. buildings) in both territories are assessed based on depreciated Edmonton construction costs, using Alberta's depreciation schedule. The value so determined for Yellowknife is then multiplied by a factor of 1.35, which is set out in regulations. According to the assessment data provider, this was done to reflect Yellowknife's actual construction costs relative to Edmonton's. Yellowknife's assessed building values therefore approximately reflect market value. Footnote 15
Outside of Yellowknife, in the two territories, a discount factor of 0.666 has been applied to building values initially assessed at depreciated Edmonton construction costs. This factor is also set out in regulations and, according to the assessment data provider, was introduced to encourage development. Upon data entry, this embedded 0.666 scaling factor is removed from the building values in the Northwest Territories outside of Yellowknife and Nunavut.
f. Removal of machinery and equipment values in Alberta, Northwest Territories and Nunavut
Property values for machinery and equipment (M&E) components in the non-residential category are deemed to be out of scope.
The data received from Northwest Territories and Nunavut contain a sizeable share of M&E components in the non-residential total. They are mainly embedded in the following three non-residential classes: mineral, transmission and hydrocarbon. The M&E components are removed by multiplying the reported improvement values by a deflationary factor for each of the previously mentioned three non-residential classes. These factors are provided yearly by the respondents. This treatment ensures that only real property values are included in final estimates, and that the M&E components are excluded.
In Alberta, property values for the M&E components are reported separately by the data providers and are excluded from the final estimates.
g. Removal of personal property values in Manitoba
The assessment roll in Manitoba includes personal property such goods and chattels, which are not considered real property. Such property values are excluded from the estimate.
h. Mixed-use properties
Some properties are used for both residential and non-residential purposes. In cases where no further breakdowns are available, the values of mixed-use properties are redistributed between residential and non-residential property types according to the existing distribution of total residential and non-residential property values by CSD. In cases where further breakdowns are available, mostly in jurisdictions where microdata was received, the values are assigned according to the exact breakdown. Mixed-use residential and non-residential properties that are redistributed represent 0.015% of the total valuation of properties in Canada.
One of the most common cases of mixed-use type properties are of a building consisting of ground level commercial with one or more floors of residential units above.
10. Quality control
Statistics Canada's quality assurance framework requires an assessment of data relevance, accuracy, timeliness, accessibility, interpretability and coherence. The quality of the raw input data collected from provincial, territorial and municipal assessment departments and agencies cannot be evaluated in this framework. However, confrontational analysis is performed to compare the source data to existing statistical programs and public information such as annual reports obtained from Provincial websites and assessment agencies. Any irregularities identified are carefully reviewed and analyzed before the official release of the data.
Total adjusted residential estimates, for both taxable and exempt properties, are compared to Statistics Canada's Census of Population. The coherence of the values is examined by census coverage analysis, which compares the source data to private dwelling counts and values found in Statistics Canada's Census of Population.
Annex 1. List of CSD types representing First Nations and other Aboriginal Groups Footnote 16
The following are the list of CSD types representing First Nations and other Aboriginal groups presented by province and territory.
| Province / Territory | CSD Type | CSD Type description | Legal Code | Legal Code description | Number of CSDs |
|---|---|---|---|---|---|
| NS | IRI | Indian reserve | FL | Federally legislated | 2 |
| NB | IRI | Indian reserve | FL | Federally legislated | 3 |
| ON | IRI | Indian reserve | FL | Federally legislated | 1 |
| MB | IRI | Indian reserve | FL | Federally legislated | 9 |
| MB | S-É | Indian settlement | U | Not legal municipality - aboriginal geography | 1 |
| SK | IRI | Indian reserve | FL | Federally legislated | 3 |
| SK | S-É | Indian settlement | U | Not legal municipality - aboriginal geography | 1 |
| AB | IRI | Indian reserve | FL | Federally legislated | 1 |
| BC | IGD | Indian government district | PL | Provincially legislated - legal municipality | 2 |
| BC | IRI | Indian reserve | FL | Federally legislated | 3 |
| BC | NL | Nisga'a land | FL | Federally legislated | 1 |
Annex 2. List of Provinces and Territories with Microdata in tax year 2021
Newfoundland, Nova Scotia, Ontario, Manitoba (except Winnipeg), Saskatchewan (Swift Current only), British Columbia, Yukon, Northwest Territories, Nunavut.