Because the size of a mortgage is partially limited by the amount of property taxes to be paid, these annual taxes are a significant affordability factor in housing. According to an annual survey of Canadian municipalities, Alberta's Medicine Hat and Red Deer have the lowest property taxes while Montreal's taxes are the highest.

The higher property taxes are, the smaller the mortgage will be. When approving a residential mortgage, lenders use the Gross Debt Service (GDS) Ratio which requires that mortgage principal (amount), interest and property taxes equal no more than a specific percentage of gross income, i.e. 28 to 30 per cent. Condominium maintenance fees, heating costs and personal debts may also be included in this ratio or the Total Debt Service (TDS) Ratio. (For more on GDS, check out PJ's column "Canadian Buyers Save Time With Less Down" or "Is Canadian Cottage and Home Ownership Affordable?")

The City of Edmonton, capital of the province of Alberta, conducts an annual survey of property tax and utility charges for an average single-family house in 25 major Canadian cities to assess the relative burden to Edmonton property taxpayers. A similar survey of 11 Edmonton Region municipalities has been conducted annually since 1997.

In 2003, Medicine Hat had the lowest property tax at $1,409, followed by Red Deer ($1,462) while Montreal had the highest tax at $2,887, with Hamilton, Ontario, ($2,829) close behind. Edmonton's total property tax of $1,700, including municipal and school taxes, for the standard house was 18 per cent lower than the 25 cities' average of $2,066 and ranked the tenth lowest.

The house used in the survey is:

A twenty-five to thirty-years-old, single detached, three-bedroom bungalow with a main floor area of 1,200 square feet, having a double car garage and finished full basement, on a 6,000 square-foot lot located in an average neighbourhood of the city.

This house was chosen because houses aged 25 to 30 years old account for the highest percentage of the total single-detached houses in the Edmonton Region. Therefore, it is more suitable, and less confusing, to represent a typical house in an average neighborhood for all cities.

Three different measurements were used to compare property tax burden to taxpayers in Edmonton with the other 24 Canadian cities and the 11 Edmonton Region municipalities:

1. Property tax on a sample single detached house,
2. Average property tax of all single-detached houses, and
3. Median property tax of all single-detached houses.

In all three comparisons, Edmonton ranked better than most of the Canadian cities and the local municipalities. Edmonton's municipal property tax levy of $1,004 ranked the fourth lowest among the 25 Canadian cities and stood at the middle among the 11 municipalities in the Edmonton Region surveyed in 2003.

Interestingly, Vancouver had the lowest total property tax per person at $734, followed by St. John's, Newfoundland, at $742 and Medicine Hat at $796. Toronto had the highest tax per person at $1,886 -- a significant cost compared to the next cities in line: Victoria at $1,660 and Ottawa at $1,605. Edmonton's total property tax per person ranked the seventh lowest.

The property tax information contained in this report should not be used to compare management efficiency among municipal governments since tax differences are attributable to many factors including:

• The structure and sources of municipal governments' operating revenues,
• The levels and costs of services provided,
• The use of split mill rates,
• Different ways for financing local improvements, and
• The extent the user pay policy is applied.

However, property tax differences are a useful measurement of the comparative tax burden to homeowners and the impact on affordability.

Published: March 2, 2004

Use of this article without permission is a violation of federal copyright laws.

Futurist and Strategist PJ Wade is "The Catalyst" - intent on "Challenging The Best to Become Even Better." PJ earned this title by translating the dynamic impact of Boomers and their multi-generation families into relevant insights that start people thinking and taking action—in business and in life. Author of 8 books and more than 1800 published articles, PJ encourages individuals to become their own futurist. PJ writes and speaks about the insight, knowledge and solid decision-making skills that professionals and their clients need to live and work in this vortex of change. For instance, since PJ knows that home is headquarters for the new decades-long "unretirement," she wrote the popular book "Reverse Mortgages: Best Friend, Worst Enemy...Your Choice!", which is filled with suggestions and cautions on protecting, building and managing home equity. Her new business book, "What's Your Point?: Cut The Crap, Hit The Mark & Stick!" will be published in 2012. As The Catalyst, PJ provides strategic communication, client appreciation and advanced education services to the financial, tourism, lifestyle and service sectors - and the clients they serve. A frequently-quoted financial and business commentator, PJ is a thought-provoking strategic speaker who offers practical, real-life suggestions on leaving "the box" behind and embracing Forward Thinking - a talent she regularly demonstrates in this column. For more on keynotes, blogs, books and information on a range of 21st-Century topics, visit TheCatalyst.com.