Area property values soar to record levels this year

Property values in Santa Clara County soared to record levels this year, although economic headwinds have begun to emerge that could undermine the area's resilient real estate market.

Santa Clara County's property tax roll — which includes both secured real estate and unsecured items, such as a company's equipment — jumped to an all-time high of $661.2 billion as of Jan. 1, the Assessor's Office reported.

The value of the county's property tax roll increased by 6.7% this year compared with the 2022 reporting year, according to the county agency. Santa Clara County properties had a combined assessed value of $619.95 billion for 2022.

“The leading contributors to the increase in property assessments are changes in ownership and new construction, which accounted for $21.5 billion and $6.8 billion, respectively,” the office said in a press release. Under California's Proposition 13, the assessed value of an individual property may increase no more than two percent annually unless the property changes hands — meaning that sales and construction typically drive the largest increases in the tax roll.

East Bay and Peninsula assessment officials also reported steady gains in the value of assessed properties in Alameda County, Contra Costa County and San Mateo County, documents and reports show.

Santa Clara County's gain for 2023 represents a robust rate of increase in line with recent years, according to historic information provided to this news organization by the Assessor's Office.

Values rose 7.4% in 2017, 7.3% in 2018, 6.8% in 2019, 6.9% in 2020 and 4.6% in 2021.

Alameda County's total property tax roll was $414.86 billion for 2023, an increase of 7.3% from the 2022 total of $386.73 billion. The 2022 total was up 7.9% from 2021.

Contra Costa County reported a total property tax roll of $266.67 billion for 2023, up 5.9% from the $251.71 billion property tax total reported for 2022. The 2022 total represented an increase of 7.8% from 2021.

San Mateo County's property tax total roll was $307.75 billion for 2023, an increase of 6.9% from the 2022 total of $287.97 billion. The 2022 total was up 8.3% from 2021.

These increases are especially important for the budgets of public agencies that depend on property tax revenues, like counties, cities and schools.

Despite the South Bay's sturdy increase to a record-setting level, headwinds have emerged that are poised to hobble the region's property markets, Santa Clara County Assessor Larry Stone warned.

“While residential property values have stabilized recently, high mortgage interest rates and inflation have reduced consumer buying power,” Stone said in a statement. As a result of these factors, property values in some areas of the county have declined over the last year, and some owners may see their property taxes go down in 2023, a rarity in the post-proposition 13 era.

So it's entirely possible that the overall increase in the rolls could be somewhat fleeting. Problems have emerged for both commercial properties and residential properties.

“With residential sales volume down 20% and office vacancy increasing due in part to remote work, the volatile and unpredictable nature of Santa Clara County real estate causes us to question the future of property values,” Stone said.

Stone's office noted in the press release that “Silicon Valley was on the precipice of unprecedented new commercial development when an uncertain economy and business outlook caused everything to slow down. While there are many large projects in progress, relatively few new properties have commenced development. The high-profile Google Downtown West project, expected to be the largest single development in San Jose history, is now placed on a temporary pause.”

But one real estate expert, Bob Staedler, principal executive with Silicon Valley Synergy, disagreed with Stone's assessment of a volatile property market.

“I don't see how Santa Clara Valley real estate is volatile,” Staedler said. “While the horizon looks challenging with the commercial office market, I don't see the `sky is falling' mentality coming to fruition.”