- Colorado’s property taxes surged after wealthy Americans opted to move during the pandemic
- Longtime residents say they have faced tax bill hikes of up to 40 percent as their property values soared
Longtime Colorado residents are being forced to sell their homes and drain their savings after a huge pandemic influx sent their property taxes soaring.
Retired X-ray technician Marleen Gamble, 84, told an investigation by the New York Times that she has been selling almost all of her possessions – including her prized jewelry – after suffering a 20 percent property tax spike.
‘Every knickknack I have, everything I don’t use, I’m selling,’ she said. ‘What I owe now is $962.62. I think I need to use two credit cards to do it. And I’m going to have to pay interest on those.’
Yet, the senior isn’t even among the worst afflicted Coloradoans, with some seeing their payments surge by up to 40 percent.
The new dynamic has been fueled by pandemic homebuyers, who sought the refuge of the Rocky Mountains to wait out lockdowns and enjoy the outdoors while working from home.
Colorado lawmakers have been searching for solutions to the crisis, however the reason for the surge makes the challenge even tougher.
Namely, because the population increased and many were affluent people with the ability to move easily in the pandemic, local and state governments have also struggled to keep up with expanding services, with property taxes a prime funding tool.
This has meant that offering relief to struggling homeowners has hardly been met.
‘This has been a phenomenon in Colorado, Montana, Utah, Arizona, the Western states,’ Colorado Governor Jared Polis told the Times.
‘If your home value went up 40 percent, that might be a wonderful thing on the equity front, but it doesn’t mean you have 40 percent more cash to pay taxes.
‘Your salary might have only gone up over two years 10 percent or 12 percent. That’s the challenge we face.’
In Colorado, property taxes are calculated by multiplying the property’s value by a statewide rate set by the state government, which is then multiplied by a town’s mill levy rate decided by the cost of services such as schools.
An increase in residents increases the cost of public services – and the amount of tax levied to pay for them.
Tax expert Adam Langley, associate director of tax policy at the Lincoln Institute of Land Policy, told the Times that the reason the tax bills have soared so considerably is due to several factors.
In particular, property values are assessed by the state every two years, so property taxes are being calculated based on mid-2022 prices when interest rates were low and home prices were at their height.
He also cited a failure from Colorado’s local governments to reduce their mill levy rates, and the 2020 repeal of the Gallagher Amendment that limited how much homeowners would have to pay in property taxes.
‘Colorado is mired in a property tax mess with no easy way out,’ added Billy Hamilton, the deputy chancellor and chief financial officer of the Texas A&M University System.
In Douglas County, between Denver and Colorado Springs, one in five homeowners are facing at least a 40 percent spike in property taxes, according to the Common Sense Institute.
Brittany Hailey, a property manager in the mountainous area of Carbondale, said areas like hers have been particularly affected as wealthy people preferred them when they made the move.
This has resulted in a lack of affordable housing, forcing less affluent families to move elsewhere.
‘The billionaires are pushing the millionaires down the valley,’ she said.
Pitkin County manager Jon Peacock, who oversees the rich skiing community of Aspen, added: ‘That could put some folks at risk of not being able to stay in the community.’
Notably, Colorado homeowners have still been paying less than much of the rest of the country. Before recent increases, the median annual property tax bill for primary residences in Colorado in 2021 was $2,259, or 19 percent below the national median of $2,795.
But for people like Hailey, who owns two homes in the area, her family have seen their property tax bill surge by over 36 percent.
And because she often rents out her home, a new bill could add even more to her bills, as it would classify homes rented out for more than 90 days a year as commercial properties – which pay four times higher rates.
‘The lawmakers think that this will maybe reduce the number of second homes, or punish people who have more than one home,’ she said. ‘They’re trying to find a scapegoat.’
This was agreed with by second homeowner Mike DeGuire, a retired school principal who said the entire tax structure should be re-written to fund the state’s underfunded schools.
‘Maybe we’re not thinking the way we should with property taxes,’ DeGuire said. ‘It’s almost a psychological thing — people are used to getting their refunds, and they’re used to their taxes not being so high, so we’re in a real bind.’
A state task force organized by Polis has proposed several recommendations to fix the crisis, including allowing the state to step in if property taxes cross a certain threshold.
They have also suggested separating school funding from other funding and reducing commercial housing rates, to help second homeowners renting out their homes.
February auto sales hit an all-time high for the month after jumping 24.4 per cent from last year, DesRosiers Automotive Consultants Inc. said Monday.
Sales totalled an “astounding” 129,000 units for the month, the consultancy said, up from around 104,000 for the same month last year.
The sales total also eclipsed the 125,000 units sold in February 2020, the last time the month had an extra day and just before the pandemic threw the industry into turmoil.
The seasonally adjusted annual rate of 2.1 million units for the unseasonably warm month was the highest since January 2018, said DesRosiers.
The latest sales figures, marking the 16th consecutive month of year-over-year growth, shows many of the challenges faced by the industry are now under control, said Andrew King, managing partner at DesRosiers, in a release.
“February 2024 sales tell us that some of the hurdles of recent years – and specifically the supply constraints of new vehicles – are now well and truly in the rear-view mirror.”
The pandemic had created supply issues both through plant shutdowns and a surge in demand for electronics that led the auto industry to have a shortfall of semiconductors. The disruptions led to a shortage of supply and a surge in pricing as automakers focused on their priciest and most profitable models.
Production is expected to finally return to pre-pandemic levels this year.
A Scotiabank report last month estimated that North American production should hit 16 million units this year, roughly in line with the 10-year pre-pandemic average.
Last year’s production was estimated at 15.6 million units, while the 2021 low was 12.9 million.
But while production is recovering, prices are still elevated.
The average price of a new vehicle hit $67,259 in December, up 14.2 per cent from a year earlier, said AutoTrader in its latest monthly report. The average for used vehicles reached $36,863, a 1.7 per cent increase.
More supply does look to be at least taking pressure off price growth. The average new vehicle price in December was down 0.3 per cent from November, while the used vehicle price was down 2.4 per cent from the previous month.
But even with prices high, King said there is enough pent-up demand to keep helping drive sales.
The rise in Brisbane property prices last month caught many people by surprise, but experts are divided on whether the surge will continue through the rest of year.
CoreLogic says values rose more than 13 per cent in 2023 and lifted a further one per cent in the first month of this year.
Regional values rose a tad under nine per cent last year and half a per cent in January.
There was a recurring theme as hopeful buyers inspected a recently listed inner-Brisbane apartment on a muggy afternoon this week.
Buyers still feeling FOMO
Phoebe told the ABC the fear of missing out is real.
“It’s the competition really that we’re struggling with. There’s not a lot on offer and places are just getting snapped up super quick,” she said.
“Prices are skyrocketing and it’s a race against the clock really to get into the market.”
Another potential buyer added: “It’s frustrating as we see things coming up, and by the time we get to the first inspection, an offer has already been made.”
Angus Kizil said he was lucky enough to purchase his first home in Indooroopilly last year.
“It’s been a journey, some really fierce competition — [at] the inspection of the property I bought, probably 100 people turned up,” he said.
He believes a lack of government investment to incentivise residential construction is to blame.
“Unfortunately, given that backdrop, I’ve personally formed the view that the market is just going to keep going,” Mr Kizil said.
“You can’t change the rules of the game, so you have to sort of look after yourself, and my partner and I are looking at getting investment property as a result.”
What’s driving the gains?
CoreLogic head of research Eliza Owen said Brisbane’s median property value of almost $800,000 remains attractive to a wide range of people.
“It’s still got a relatively affordable price point with more value for money than what we see in the major southern capital cities,” she said.
“There’s also been very intense levels of interstate migration.
“It pulled back a little to about 30,000 people over the year to June 2023, but that’s still almost double the decade average of interstate migration levels.
“That, coupled with the return of overseas migration, is really driving up demand pressures across Brisbane.”
Economist Diaswati Mardiasmo said Brisbane was becoming more of a “world city”.
“If we look at all of the buildings that are currently being built, we’re seeing more seven-star hotels, upgraded entertainment centres, really very much kind of becoming a little bit more like Sydney,” she said.
How much will prices increase?
Dr Mardiasmo said the market would cool slightly in 2024 compared to last year’s rises.
“I would say that we’ll see anywhere between a three to five per cent increase between now and the next three months, and then another five per cent in the back end of the year,” he said.
But Ms Owen said she did not expect price rises to continue at the rate seen last month.
“I think we could see a slight easing in the growth rate though for the rest of the year,” Ms Owen said.
“Even though migration trends to Queensland are expected to remain strong, there are lots of headwinds for households in terms of savings, the unemployment rate and how much people can just afford to keep paying for these dwellings.”
After an explosion in popularity following the pandemic, Dr Mardiasmo said regional values would also cool marginally.
“It’s not going to be that double-digit that we saw back in 2021 and 2022 in that post-COVID boom,” she said.
“But we are still seeing that very strong anywhere between 7 to 9 per cent growth in regional areas.”
Low stock levels also a problem for sellers
With property prices at a record high, you’d be forgiven for thinking homeowners would be eager to cash in.
But Ms Owen said property stock levels were 30 per cent lower than what the capital would historically see.
“In the construction space, we’re still seeing elevated labour and material costs, which have slowed down the rate at which new dwellings are established,” she said.
“Even prospective sellers are in a bit of a deadlock because if they put their property on the market … where are they going to go?”
Brisbane real estate agent Brett Andreassen said the interest in properties lifted last month.
“The main factor for that is the lack of stock on the market,” he said.
“But there’s a bottleneck at the moment for stock where there’s a lot of people who would want to move, but because they’ve got nowhere to move to, they’re staying put.
“And then a lot of people who would typically go and rent somewhere for the short term aren’t moving because of the rental situation.”
What about the rental market?
Ms Owen said a sharp uptick in rental prices had many Brisbane renters looking for roommates.
“We’ve seen a bit of an alarming trend in the past few months with a reacceleration in growth in rents across Brisbane, particularly in the house market,” she said.
“I think the reacceleration in house rents could actually be a result of more share housing occurring, with people looking to spend more on their rental dwelling, but less per bedroom.
“And so in a weird way, it does actually help alleviate rental costs for some.”
By Zak Wheeler For Daily Mail Australia
02:50 24 Jan 2024, updated 03:02 24 Jan 2024
The dream of owning a home is drifting ever further out of reach for most Aussies as property prices continue to skyrocket.
Sydney‘s median house prices are the highest in the country and have recently hit a new record with the price now at $1.6million.
The figure is only expected to continue going up as interest rates and taxes are looking to receive a cut which will incentivise more buyers.
Median house prices have risen across the country with the figure at $1,047,273 in Melbourne, $888,285 in Brisbane, $875,034 in Adelaide and $742,390 in Perth.
The median – or middle – salary stood at $67,600 in August with this figure covering everyone working full-time or part-time.
Someone on this income with no children buying on their own would only be able to borrow $324,800, a RateCity analysis for Daily Mail Australia showed.
Prices in Sydney have risen by $6,000 since the previous peak in the March quarter of 2022, but this trend is expected to slow in 2024.
Anyone looking to enter the property market is likely to need at least $1,595,310 according to the latest Domain House Price Report which was released on Thursday.
From December 2022 to December 2023 the average price of a house has risen by 10.6 per cent and the price of units by 2 per cent.
The median price of a home in Sydney is now roughly twice that of a unit, with the former benefiting from house scarcity and cashed-up buyers.
‘These are buyers that are active, less sensitive to interest rates, they’re supported by family members, family wealth, or they are owner-occupiers that are well established, and they are less sensitive to the cost of debt,’ Domain chief of research and economics Dr Nicola Powell told the Sydney Morning Herald.
Every region of the city is more expensive to buy in today than they were one year ago, except for units on the Central Coast which are down 7.2 per cent.
The suburbs that received the biggest boosts include the Ryde area, the inner west, northern beaches and the north shore.
Areas to the west of the CBD like Baulkham Hills, Hawkesbury, Blacktown, the outer south-west and Parramatta all experienced a decline in unit prices in the December quarter of 2023.
BresicWhitney chief executive Thomas McGlynn told the publication that this downward trend was likely caused by supply exceeding demand as investors sell and families suffer mortgage pain.
The areas where there were a lack of listings however saw the best growth, according to Westpac senior economist Matthew Hassan, who expects prices to continue going up.
An insurgence of migration and general population growth has also seen rentals become more limited which in turn has boosted the prices tenants are willing to pay.
This, combined with proposed interest rate and tax cuts, could cause another unexpected boost soon, according to Westpac senior economist Matthew Hassan.
‘Tax relief is coming through and there would be some other policies waiting in the wings because state and federal governments are keen for more new houses to be built. We do expect prices to rise, but something has to happen to really kick it along,’ he told the publication.
Dr Powell predicted a 7 or 9 per cent increase in Sydney home prices should stage three tax cuts put more money into buyers’ pockets.
But as prices rise, Mr Hassan said the ‘$1 million question’ would be if people would begin migrating out of Sydney as the city’s affordability worsens.
Diana Batkin, 50, works for a medical company has been trying to buy a unit as an investment property for more than a year but has struggled to enter the market.
Ms Batkin remains hopeful that even though interest rates remain high that she will be able to enter the ‘strong and competitive market’ soon.