Property Values in Maryland Increased Following SDAT’s 2019 Reassessment

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Each county in Maryland is divided into three assessment areas; every year, one of these areas is assessed by the Maryland State Department of Assessments and Taxation (SDAT) to determine the value of the properties within that area or group. Group 1, which consists of one-third of the more than two million real properties in the state, was recently re-assessed and proved to be beneficial to property owners. The report, which was released on December 12, 2018, identified a 9.1% statewide increase in all Group 1 property values. 

To identify the change in the value of properties within this group, 696,947 residential and commercial properties were assessed by SDAT. In addition, 64,087 sales that were completed within the group over the last three years were evaluated.

How Does This Impact Property Owners?

In comparison to the last assessment, which was completed in 2016, the findings indicated an average increase in value equating to 8.2% for all residential properties and 12.5% for all commercial properties. In fact, 87.5% of Group 1 residential properties witnessed an increase in property value.

The downside, unfortunately, is that tax rates for these properties may have increased, depending on the location and value of the home. For homeowners, the amount due on property taxes is limited according to the income for the individual. For investment properties though, there is a statewide legislation cap that was implemented, limiting increases to no more than 10% per year. This percentage is even lower in some counties. So, even though tax rates may have increased, there is a cap that property owners can anticipate. 

The benefit, however, primarily overturns the downside: If you own a property in Group 1, your property value has increased. This means that you can potentially sell your home at a higher value than previously assessed. There are 23 counties in the state of Maryland plus the City of Baltimore, which is an independent city. The median home value for homes throughout the state for 2018 was $320,000 – the new average is expected to equal $346,240.

Looking at Commercial Real Estate

Similar to residential property owners, commercial property owners may have just experienced an increase in the value of their assets. Properties that had a capitalization rate of 6 before could now potentially sell on the market at a 5-cap, increasing the return on one’s investment. Here is a breakdown of the percentage change of commercial properties from January 2016 to January 2019 by jurisdiction: Allegany, +1.4%; Anne Arundal +8.7%; Baltimore City, +12.6%; Baltimore, +12.7%; Calvert, +10.5%, Caroline, -3.3%; Carroll, +12.1%; Cecil, +11.4%; Charles, +13.3%; Dorchester, -0.4%; Frederick, +15.8%; Garrett, +2.7%; Harford, +3.0%; Howard, +9.9%; Kent, -0.9%; Montgomery, +16.5%; Prince George’s, +12.4%; Queen Anne’s, +3.2%; St. Mary’s, +10.2%; Somerset, +1.7%; Talbot, +3.5%; Washington, +5.8%; Wicomico, +30.9%; and, Worcester, +18.9%. 

The values have not fully recovered since the last economic downfall in 2007, but they are on their way. The crash from this crisis caused values to decline over 78% from 2006 to 2011 (considering all three assessment groups.)

For CRE, the value increase over the three-year comparison was an average of 12.5%. The properties in the state, which were previously estimated to be worth $50,723,754,400 are now estimated to be worth $57,050,845,000 – this is nearly a $7 billion increase in value. However, the challenges associated with capturing this impact is the lack of evidence to support a specific selling price. For example, a commercial real estate broker will generally list an asset by assessing different variables.  These variables include past sales, cap rates and price per square foot for different properties.  They will also analyze current on-market listings.  With a statewide push for increased value rather than market evidence of increased value, the data to support a specific sales price may be limited. With this in mind, any commercial real estate property owner interested in selling must be cautious that they both list at an appropriate price in accordance with this report and work with an agent that is aware of the impact of this report.