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Property Valuation Explained

Learn more about how MPAC assesses Ontario properties

This section - Property Valuation Explained  - provides more detailed information about how MPAC assesses and classifies particular property types.

There are three common approaches to determining the current value of any property.

Approach How current value is determined Examples of property types

Direct Comparison Approach

This valuation method uses the sale prices of properties that have sold of a similar nature to develop market-driven price adjustments to value a subject property.

MPAC experts analyze hundreds of sale prices within a given market area to develop price adjustments for physical and locational differences between properties to establish a current value estimate for all properties of a similar nature.  Typically, adjustments to sale prices are required to recognize price differences due to building area, age, lot size, construction quality and location.  Other adjustments are often required to recognize price differences due to other building and site related features.

Single family residence

Condominium

Vacant Land

Cost Approach

The cost approach is based upon the "principle of substitution" which means that, if the direct sales comparison or income approaches are not appropriate, a prospective purchaser of a property would have regard to the cost of providing a similar property to the one being valued in determining the current value of the property.

The method is based upon estimating the cost of replacing the existing building, adjusting that cost to reflect any depreciation in the existing building, and adding the value of the land.  MPAC's experts have access to up to date, comprehensive building cost data to support this valuation approach.

Manufacturing Plant

Income Approach

The income approach is normally used where the value of the property is dependent upon the income it can generate. The income that is, or can be, generated from rents or other income in relation to the property being valued is converted into a capital sum (current value) by the use of a capitalization rate which is derived from analysis of actual sales in the market.

MPAC use the "direct capitalization" method for the valuation of a variety of properties.

Hotel, Office Building, Apartment Building

The Assessment Act

The Assessment Act and associated Regulations govern the implementation of the property tax system throughout Ontario.

The Act contains important definitions including what property is taxable and how it should be valued.

The Act states that property must be assessed at its "current value" which means, in relation to land, "the amount of money the fee simple, if unencumbered, would realize if sold at arm's length by a willing seller to a willing buyer.

For the 2017-2020 property tax years, the current value is taken to be the value of the property as at January 1, 2016.

Highest and Best Use

Before undertaking the valuation, MPAC must determine what is the "highest and best" use of the property to be valued.

This means that MPAC have to consider whether the existing use of the property reflects the most valuable use to which the property can be put.

This will depend upon whether it is feasible and allowable to use the property for a different purpose and, if so, whether that alternative use is more valuable than the existing use.

For example, land with a disused industrial building on it may have greater value for office development in which case that will be its highest and best use and it will be valued on that basis.

Data Protection

MPAC is required to manage the collection, use, disclosure and retention of personal and non-personal information in accordance with the relevant legislation        

MPAC does not publicly release:

  • income and expense information;
  • personal information;
  • any other data that would enable the identification of individuals or certain corporate proprietary information.
The relevant legislation includesThe Assessment Act, the Municipal Freedom of Information and Protection of Privacy Act, the Municipal Property Assessment Corporation Act, and other legislation, regulations, and court decisions.

Quality Assurance

MPAC is aware of the importance of ensuring that their valuation assessments are fair, accurate and consistent. To achieve this, MPAC incorporates a number of quality assurance controls into their assessment processes.

In addition to quality assurance measures, MPAC also carry out a number of checks at different stages of the assessment process to confirm that the valuations they produce meet the required quality standards.

Note: The applicable law prevails to the extent there is any conflict between this information and the current law. This information is not intended to provide legal advice and should not be relied upon as such.

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