The report released Friday by Ontario's Municipal Property Assessment Corp. said property owners will see an average assessment increase of 5.5 per cent in each year for the next four years as it phases in the increases.
"Residential property values have increased by an average of approximately 22.8 per cent in the City of Toronto since 2008 when the last assessment update was delivered," said Joe Regina, municipal relations account manager in MPAC's Toronto office.
"Our values reflect the local real estate market and confirm that most homeowners in the area have seen an increase in the value of their property over the past four years," Regina said.
Any tax increase based on the new assessments could squeeze some owners at a time when many Canadians are cutting back to meet mortgage payments and household debt sits at 163 per cent of disposable income, about the level reached in the United States before the housing crash of 2007-08.
However, an increase in a home's value doesn't necessarily mean property taxes will rise. If the assessed value of a home has risen by the same percentage as the average in a given municipality, there may not be an increase in taxes, said MPAC, which is funded and operated by the province's municipalities.
MPAC is in the process of mailing property assessment notices to more than 727,000 area property owners. Homeowners can check the accuracy of the assessment at www.aboutmyproperty.ca which allows owners to compare values in their neighbourhood.
"Property owners should ask themselves if they could have sold their property for its assessed value on January 1, 2012. If the answer is yes, then their assessment is accurate. If not, we are committed to working with them to get it right," Regina said.
MPAC assesses properties across the province based on current values. The most recent assessment is based on valuations on Jan. 1, 2012. The previous report was based on values on Jan. 1, 2008.
The four-year time frame for assessments means owners could be paying taxes based on values in January 2012, when the market was still robust, until 2016.
Canadians who could face the biggest strain on finances are those who have piled on debt to get into the market while interest rates are low. Officials have repeatedly told Canadians to reduce record debt loads and warned some could find themselves in trouble when rates rise.
A BMO survey released earlier this week suggests many Canadian homeowners have made cutbacks in the past year to make mortgage payments and three-quarters would feel a significant squeeze in their finances from even a modest rise in mortgage payments.
It found one-third of those surveyed say they've already cut back on spending, while one-quarter have reduced the amount they're saving and 17 per cent have dipped into savings to meet mortgage obligations.
And 72 per cent of respondents say they would feel significant strain from a modest increase in their monthly mortgage payments, such as from an increase in interest rates.
Economists have noted that the central bank rate — which forms the basis for the prime lending rates of commercial banks — has contributed to an unsustainable run-up in home prices and risky levels of household debt.
Meanwhile, Canada's real estate market is showing signs of cooling off following the post-recession boom sparked by the move to ultra-low interest rates, which the Bank of Canada opted to keep on hold at one per cent earlier this week.
The latest report from the Canadian Real Estate Association found that home sales in September fell 15.1 per cent from a year ago. But the national average home price was up 1.1 per cent to $355,777 in September from a year earlier.