Residential Views -
With a potential rebound of the residential property market on the horizon, Bayleys asks whether buyers still look to CVs for a price indication?
Every three years, residential property owners can expect updated council valuations or CVs, council-commissioned estimates of a property’s value which determine what proportion of rates the owners are liable for.
Working in partnership with valuation firm Opteon Tauranga City Council is currently reevaluating its residential property market, with draft results indicating a 10 percent average decrease in values between 2021 and 2023.
Using a combination of sales data, resource and building consent information, and external market specialists’ input, Tauranga is poised to receive their new CVs from October 2023.
The council says these estimates reflect the most likely selling price should the property have sold as of May 1 during the rating year.
IMPACT FOR SELLERS
Often critiqued as outdated in a rapidly-moving market, buyers sometimes incorrectly look to CVs as a price-guide for residential property, however, Tauranga City Council is careful to caution against use for anything other than a guide for setting local rates.
Yet in the absence of other demonstrated sales data such as is the case for new-build homes, the influence of an outdated CV can be frustrating.
Bayleys salespeople have found council valuations can often baffle buyers, with buoyant periods of the property cycle contributing to a fast-paced and changeable landscape for price setting.
Salespeople have remarked that occasionally, in the absence of a set price, buyers will look to public information such as CVs to determine value.
However, using these figures can be inconsistent, often offering false indications of true market value given the fact that salespeople utilise a complex set of matrices for establishing value that extend significantly past a simple computer-generated algorithm.
The Tauranga Council comments that their latest housing re-evaluations reflects dented market confidence seen in the wider New Zealand market.
However, with early signs of the residential market bouncing back from uncertainty, these values could swiftly lose their relevance.
The Real Estate Institute of New Zealand’s (REINZ) August 2023 figures show continued optimism and further activity in the property market. While listing numbers remain light, they are up on July and sales counts have increased, showing some late winter confidence.
REINZ Chief Executive Jen Baird says August often shows a resurgence of activity as Spring approaches.
“We saw steady activity this month with increased sales counts both compared to August 2022 and last month. This lift in market activity has also seen the median days to sell decrease this month,” Baird says.
BREAKING THE MOULD
In Christchurch, a different set of variables has previously influenced the calculation of council valuations with the Christchurch City Council implementing an ‘honesty system’ to determine new valuations for more than 160,000 properties.
Without an accurate database containing records about properties still affected by the 2011 earthquakes which destroyed homes across the region, the local council requested owners submit unrepaired damage to Quotable Value so they could ascertain more accurate market pricing for property across the city.
As council valuations are calculated sight unseen, they fail to account for features that have a large bearing on an eventual sale price, such as a great view, the condition of a property or car parking, amongst other things.
For salespeople, the new round of CVs offers an opportunity to aid the education of both buyers and sellers in calculating true market value.
Salespeople use a combination of valuation techniques including on-site or virtual inspections to accurately understand the selling features of a home, these are contrasted with neighbourhood sales data and a depth of understanding about planned and existing local infrastructure as well as community features to deduce an accurate price expectation.
Where in the past, buyers have used CVs as a benchmark for value owing to a lack of available information, we are bombarded with sales data today. Now less influential in the fast-paced residential property market, we anticipate the new generation of buyers and sellers to look beyond CVs for more accurate property valuations.