A new plan for property taxes on P.E.I. will cost homebuyers a lot of money, say real estate agents.

Provincial Treasurer Wes Sheridan called the change good news for Islanders. (CBC)

The changes, announced in the legislature Tuesday, follow a two-year freeze on Island property taxes, brought in when the current Liberal government was elected in 2007. That freeze is being lifted next year. Tax increases are now being tied to the P.E.I. Consumer Price Index.

"This is virtually a good news story right across the board where people can now see very transparently how their assessments are going to go up," said Provincial Treasurer Wes Sheridan.

But those controlled increases will only apply until the home is sold, at which time the taxes could go up substantially.

That's because after a home is purchased, the taxes would be based on the market value, which is often much higher than the assessed value.

Real estate agent Steve Yoston says in many cases that will result in a big hit for people buying a house.

"It will have a huge effect," said Yoston.

"Personally, with our home, that would put the taxes up by over $100 per month for a new buyer. And it would make it that much harder to find someone to buy our house because they'd have to be able to afford 100 more dollars per month."

Joel Ives, who sits on the executive of the P.E.I. Real Estate Association, said the changes will have a negative effect on unsuspecting Islanders.

"It's just going to come and hit the everyday person right in their pocketbook after they find the house that they want to buy," said Ives.

Sheridan said the system will remain transparent, because property tax bills will include both the assessed value and market value for all residential properties. Homeowners will be able to appeal either figure to the tax department.

Bills with the two taxable values will go out in the spring.