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2017-12-06 / Featured / Real Estate

Property values on the rise, tax bills to follow

BY RICH GRISET STAFF WRITER

Real estate assessments are likely to rise in Chesterfield next year, meaning more revenue for the county government and higher taxes for property owners.

Though the finalized numbers won’t be publicly available until late January, Chesterfield’s office of budget and management projects that the county will take in an additional $10 million to $12 million in real estate revenue for fiscal year 2018, compared to the roughly $326 million it collected in fiscal year 2017. For homeowners – who pay 96 cents per $100 of assessed property value in Chesterfield – it likely means a 3 to 3.5 percent increase in their tax bills, averaging out to $75 more per home.

Real estate taxes are the county’s biggest source of revenue, making up more than 45 percent of the county’s annual income. The county’s overreliance on residential real estate taxes – it’s lacking in more lucrative business and commercial property – has long been a challenge for county officials. Approximately 80 percent of the county’s real estate revenue comes from residential housing.

“For us, it’s the single most influential part of the local economy,” says Matt Harris, Chesterfield’s budget and management director, of real estate assessments. “That’s our main engine to fund county services and programs.” According to Harris, residential property values are continuing to show 3 to 3.5 percent growth, which has been the trend for the past four years. From market activity in calendar 2015 to 2016, for instance, the average county home value increased 3.1 percent.

“It’s all very positive,” Harris says. “Look at the broader real estate market: sales, construction – all the indicators that we track are pointed in the right direction, at a manageable pace.”

While Harris’ office makes assessment estimates to help determine next year’s budget, the official evaluations are calculated by the Department of Real Estate Assessment. Jonathan Davis, director of the department, declined to speculate on what the assessments will be, saying those figures won’t be finalized until next year.

“We’re right in the middle of it,” Davis says. “We usually finish it about middle of January.”

Harris says the trajectory of existing residential property values – not including new construction – is his department’s most important metric for judging improvement in the market. He expects property values will rise for the fifth consecutive year, following five years of declines after the recession. This year will mark the first time existing residential property values will top what they were before the recession, he says.

This news comes at a time when Chesterfield is widely outpacing its peers in home construction. Thomas Tyler, director of housing markets at Integra Realty Resources, says when it comes to new residential properties, Chesterfield has advantages in both its size and its abundance of lots ready for development.

While Tyler’s company doesn’t have complete figures for the third quarter, he says Chesterfield did well in the second quarter of 2017 compared to the same time frame in 2016. During that quarter, Chesterfield made up more than 43 percent of the new homes market. The next closest of the eight localities in the region was Henrico, with 22 percent.

“Chesterfield has always been the most active community since I’ve been doing this, both in resales and new home sales,” Tyler says. “The market is still recovering, and I do think that Chesterfield is definitely going to continue to have a higher pace of new and pre-owned home sales.”

Ken Brown, a senior managing director at Integra, says the commercial real estate market is also strengthening.

“Generally, the market in Chesterfield County and the Richmond metro area as a whole is solid,” Brown says. “Across the commercial property types, there’s reasonable rental growth that I think is keeping up with or exceeding the general level of inflation, and capitalization rates are generally stable. We’re seeing property values that are rising at a reasonably steady rate.”

Tyler is likewise optimistic on the strength of local real estate.

“I don’t see any reason to say that the slow and steady recovery will not continue into the foreseeable future,” Tyler says. ¦

Correction: An earlier print and online version of this article incorrectly stated that Chesterfield homeowners pay 96 cents on the dollar in real estate tax. The correct figure is 96 cents per $100 of assesssed property value. We regret the error.

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