New council valuations for residential properties are due later this year, but against a period of rapidly rising property values, Bayleys asks whether buyers still look to CVs for a price indication?
It’s been four years since Aucklanders last received updated council valuations or CVs for their properties, with the majority of the region’s neighbourhoods rising in value by more than 20 percent.
Following the global disruption caused by the COVID-19 pandemic and ensuing economic difficulty and recession, Auckland Council deferred its revaluation of the region’s properties by 12 months, noting an inability to source reliable market data given the volatile economic climate.
Traditionally updated every three years, CVs for residential property are council-commissioned estimates of a property’s value, calculated to determine what proportion of rates the owners are liable for.
Working in partnership with valuation firm Quotable Value (Q.V) Auckland Council uses mass appraisals and computer-generated estimates, which despite remaining sight-unseen by council officials, determine a property’s market value.
These estimates are publicly available.
The council says these estimates reflect the most likely selling price should the property have sold as of June 1 during the rating year.
The estimates factor in known consented works and subdivision or zoning changes, but do not include chattels.
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Often critiqued as outdated in a rapidly-moving market, buyers sometimes incorrectly look to CVs as a price-guide for residential property, however, Auckland Council is careful to caution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Yet in the absence of other demonstrated sales data such as is the case for new-build homes, the influence of an outdated CV can be frustrating.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.
Heightened buyer interest and competition for quality properties have a direct correlation to the number of properties sold by auction, a process that does not traditionally offer value indication until the transparent auction day proceedings.
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.
With the Auckland region poised to receive new CVs from October 2021, there is potential for the picture to become even more hazy, given significant recent intensification and zoning changes across many of our urban communities.
Properties rezoned to allow greater intensification under the Auckland Council’s Unitary Plan have benefitted from an almost instantaneous value lift underpinned by a scarcity of land for development and strong demand for new housing.
This, coupled with the wealth effect of monetary stimulus and the low interest rate environment we have enjoyed for many years has enabled property developers to pay elevated prices for developable land sites.
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.
Thanks to a high-profile property market that has drawn international attention and the intervention of the Government and the Reserve Bank, buyers are increasingly wary of sales estimates that are light on detail and we expect the new generation of house hunters to pay less attention to these numbers when seeking a value estimate in the current market.
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