A work crew lays the foundation for new classrooms at Hubbard Elementary School of the Alum Rock Union School District in San Jose, California, on Wednesday, June 28, 2017. The district is under fire for fiscal mismanagement of bond funds used for construction and repairs on its schools. (Gary Reyes/ Bay Area News Group)
The local property-tax growth spurt may be flattening a bit, but the latest snapshot’s still one for the record books.
In a reflection of Silicon Valley’s longest upbeat economic cycle since the ”dot-com boom” days, Santa Clara County Assessor Larry Stone on Thursday announced that the annual assessment roll has reached $450 billion, a 7.37 percent increase over the prior year. That number represents the total net assessed value of all real and business property in Santa Clara County as of January 1 of this year.
Meanwhile, San Mateo County showed similarly unprecedented numbers, with its assessment roll up nearly eight percent to $206 billion, hitting a record high for the sixth consecutive year.
In Santa Clara County, the growth in taxes was due primarily to significant new construction, changes in ownership, growth in business property and the two-percent increase mandated by Prop. 13, said Stone’s office. Also helping out were value reassessments of properties that had previously received a temporary reduction under Prop. 8. Those reductions came about in the aftermath of the collapse of residential and commercial property values during the “Great Recession.”
“Silicon Valley’s real estate economy is stabilizing,” said Stone. ”Santa Clara County has had six consecutive years of job gains, reaching a 4.1-percent rate of growth, better than the Bay Area overall at 3.3 percent and the state at a respectable 2.6 percent. However in 2016, layoffs by technology companies surged 21 percent, contributing to a flattening of the rate of growth in assessed values year over year.”
Still, Stone said, Silicon Valley has experienced 26 quarters, over six years, of positive office development and leasing.
“Even better,” he said, “the current economic cycle is nothing like the ‘dot-com boom’ in the late 1990’s, in which real estate development was largely speculative. High tech startups, with little or no earnings, frequently leased far more space than they needed which contributed to the ‘dot-com bust.’”
We all remember Webvan, right?
Stone said back in those days “tenants leased more space than they needed, expecting growth that never occurred. Today, well established companies like Google, Apple, and Samsung with real earnings and profits, are acquiring land and buildings, favoring ownership over long term leases.”
Google’s recent announcement that it was buying up large tracts of property around the Diridon Station and SAP Center to host a huge new campus is just one example of this dramatic growth in investment.
“It is important to keep in mind that the annual assessment roll is a snapshot of the real estate market place as of January 1,” Stone added. “Recent expressed interest by Google in downtown San Jose, or the development of the new Apple “spaceship” campus will not be fully assessed until completion and occupancy.”
But it wasn’t just the business sector that showed record numbers — in 2016, the residential sector, both multi-family and single family, continued to be strong. Despite a brief slowdown in the beginning of 2016, Stone said that in the second quarter home prices and sales surged again, up 115 percent from a year earlier.
In neighboring San Mateo County to the north, a similar picture emerged. That county’s latest assessment roll reached a record high once again, said county assessor Mark Church. He said San Mateo’s roll increased year-over-year by $15 billion, or 7.9 percent to a record high $206 billion in assessed value, setting a new milestone for the county and breaking the $200 billion barrier for the first time.
“This is a major milestone, continuing to establish San Mateo County as a premier location in the state,” said Church. “The roll is now more than 46 percent larger than it was in 2010. This is the sixth year in a row that a new historical high has been set, and the seventh consecutive year the Roll has moved in a positive direction.”
As in Santa Clara County, Church said that “extensive business expansion throughout San Mateo County by industry leaders continues to be the catalyst for massive new construction, soaring job growth and rising real estate prices, resulting in another record roll value. We are seeing unprecedented growth in the technology, life sciences, and housing sectors, reinforcing San Mateo County’s reputation as a center of innovation, and establishing a strong economic base for the County’s future.”
In San Mateo County, the growth was consistent throughout the county, with assessed values climbing in all 20 cities and unincorporated areas and increases ranging as high as 19.75 percent. The county’s unincorporated areas, which include San Francisco International Airport (SFO), experienced a growth rate of 9.46 percent.
Church said that the top 5 cities in percentage growth are:
East Palo Alto (+19.75 percent)
Menlo Park (+10.52 percent)
San Carlos (+9.13 percent)
Redwood City (+8.5 percent)
Foster City (+8.43 percent)
Rapid value growth in East Palo Alto is largely due to new projects coming to market, the transfer of the Woodland Park project, which includes 101 buildings on 49 acres, and residential value increases in one of the last affordable places on the Peninsula. In nearby Menlo Park, and surrounding cities, there has been a trend of buying older houses to rehab or demolish and build new, which is increasing home values along with increased demand due to strong local employment.