The new rating year has already begun, with council valuations of some 1.83 million homes across the country due for release mid-November.
So how can homeowners expect these valuations to influence the value of their property, asks Bayleys property reporter Katharina Charles.
Revised every three years, council valuations (C.V’s), otherwise known as Rating Valuations or Government Valuations) are council-commissioned estimates of a property’s value, for the purpose of determining what proportion of rates owners are liable for.
Working with valuation firm Quotable Value (Q.V), local councils find these values using mass appraisals and computer-generated estimates which are sight-unseen by council officials.
These estimates are the most likely selling price should the property have sold as at July 1 during the rating year. The estimates take into account any known consented work, subdivision or zoning changes but do not include chattels.
Poised to affect sale values in a variety of ways, C.V’s are often criticised for being ‘outdated’, ‘inaccurate’ and ‘applied incorrectly’ by buyers using the estimates as a price guide in a rapidly moving market.
Taking place in 2014, the last round of council valuations caused a significant stir in the wake of rising property values, with some property owners noting that their valuations and rates bills had increased by a third and in some cases even more.
Research conducted by valuation and data firm My Velocity found that in 2016, residential property sales across the country were netting prices on average 16 percent higher than their 2014 C.V’s, with the most extreme discrepancies in Auckland (37.4 percent), Queenstown (35.3 percent) and Tauranga (27.9 percent).
“C.V’s often baffle buyers,” says Bayleys Tauranga salesperson Jan Hodges, who sold a property in Bethlehem for 43 percent above its 2014 council valuation.
“During the most buoyant periods of this property cycle (2015), values were increasing exponentially by the day, with many sellers choosing a sale by auction as fairest way to determine market value.
“Unfortunately in the absence of a set price, buyers will look to public information such as C.V’s to determine value, something we as real estate professionals have been working to educate people against.”
Bayleys national residential and auction manager Daniel Coulson agrees, saying that buyers have a far different set of matrices for establishing value that extend past a simple algorithm involving inputting the square meterage of build onto the square meterage of land.
The latest round of council valuations are poised to paint an even more complicated picture as intensification and significant zoning changes across main centres (particularly Auckland, Hamilton and Queenstown) have been touted as one of the main variables set to affect estimated values this year.
“With recent intensification we have found properties in preferably zoned areas which afford buyers more freedom for development with less stringent building rules, generally sell for more,” says Jan Hodges.
“Areas such as Tauranga, Hamilton and Queenstown have experienced a significant zoning shake-up which have had big impacts on sale prices, and we expect that the latest round of council valuations will reflect this.”
In Christchurch a different set of variables are poised to impact C.V’s with the Christchurch City Council using 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 Christchurch earthquakes, the local council has asked owners to submit unrepaired damage to Quotable Value in order to ascertain more accurate market values for property across the city.
“As council valuations are sight unseen, they often do not take into account influential factors such as views, condition, water and other types of damage,” says Daniel Coulson.
“It’s increasingly important that buyers understand council valuations are not an accurate indication of currently market value.”
“Using a combination of valuation techniques; a licensed local salesperson and an independent valuation following inspection and appraisal of the property’s unique features are the only way to ensure a realistic valuation, especially as the market continues to shift.”
“In the past buyers have used C.V’s as a benchmark for value because there was a lack of information available.”
“Today there’s more choice and buyers are increasingly aware of the need for a current and tailored valuation, leading us to believe that while the new round of C.V’s will affect household rate payments and paper equity, buyers will pay less attention to these figures when looking to purchase a property in the current market,” Daniel says.