Yep, they’re out and the predicted drops in GV (Rating Valuation) have eventuated in many areas of Wellington. The Wellington City Council has been reviewing the Rating Valuations of the homes under its jurisdiction using Quotable Value and these new values were released online in the last day or so.
Having just done an audit of the homes the my company has on the market, most of the properties are showing a slight drop in RV (Rating Value) of around 5%. There have been some rises but this seems to have been limited to areas of new housing like Churton Park. It appears to me that the drops have come about as an adjustment to the Land Values not the Improvements Value. I am hearing through the grapevine that there has been a general drop of around 3.5% across the city, but this is unsubstantiated.
The biggest drop that I have seen so far involves a large parcel of rural land that has had a third of its value wiped from the Council books.
What do these changes in RV mean if anything?
There will be an adjustment period as owners and potential buyers come to grips with the new RV’s and how they compare with selling prices.
Some owners will pay less rates and some will pay more depending on how their Rating Value moved compared to other homes in the Council catchment.
Interestingly, prices in my area of influence in North Wellington are on the firm march upwards and these new RVs are already out of step with actual market value at the coalface (I compared the sale prices in the last month in our office with the new RV’s and most were at least $20k out with a couple more than $60k out). Now that the Council is moving to three yearly reviews to save themselves money, one can only wonder how out of kilter these values will be by the time they get redone again in 2012.
You can dispute your RV if you feel that it doesn’t do your property justice, but the only reason you would do this is if you were currently on the market or you were going to sell soon. Don’t let your ego get in the way of common sense. Why would you inform the Council that you want to pay MORE rates?
The timing on the disputes process will be longer than usual this year as there have been drops, so expect it to take at least a month or so for the powers that be to get into contact with you.
For more of my thoughts on the subject, have a read of a related post I made regarding RV’s here.
You can find out what your new RV is along with anyone other property in the WCC catchment for free until the end of November. Go to www.qv.co.nz and enter the address you want to check in the search bar. You’ll have to register so that QV can harvest your details for future emails, but it is free to d so. ONce you have registered, choose “Rating Valuation Report”. This is usually about $3 but is free for a limited time.
November 02 2009 | General Real Estate and North Wgtn House Market Trends | No Comments »
A reliable little birdie told me that there are pockets of Wellington that will see Rating Values decreased including parts of Newlands and Johnsonville. This hasn’t been substantiated but a downgrade is understandable in the light of the global recession.
Quotable Value is in the middle of its reassessment of Rating Values (GV’s) currently. It has been two years since they were last reviewed (Sept 07). This is the transition year with the Council moving to three yearly Rating revaluations.
Interestingly, prices have come back up to Nov 2007 levels in the Northern Suburbs especially at the lower end. By the middle of last year, homes were selling across the Northern Suburbs for about $20k less than the homes Rating Value (previously GV or Government Valuation). Currently, we are looking at about par with homes selling for approximately their RV. This of course, is a rank generalisation and each home has to be considered on its own merits, but people always ask me this question so against my better judgment, I find myself talking about price to GV comparisons.
If the RV’s get downgraded, they will be way out of wack in three years time. Moving from annual to three yearly reviews will save the Council quite a stack of cash which is positive, but it will certainly play havoc with the housing market. With a longer time between reviews, the Rating Values on homes in the area will have little or no resemblance to actual market value for most of the cycle.
The opportunity to manipulate the RV of your home to your advantage will certainly provide benefits to home sellers who know how to use them. Read my blog on the subject here.
If this rumour is true, a downgrade of RV’s will lower price expectations in the minds of buyers, so if you are considering selling your home this summer. You have a two month window of opportunity now while stocks on the market are at all time lows, and before the new RV’s are released in mid to late November. I would love the chance to talk with you if you are in the zone for selling your home soon…
Learn more about Rating Valuations by visiting the Council website here and by visiting the QV website here.
October 03 2009 | General Real Estate | No Comments »
Does your home’s Rating Valuation represent real value?? And what is market value anyway?
Market Value is the most probable amount that a willing and informed buyer will pay and a willing and informed seller will accept for a property in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.
I have just finished reading Jama’s rant about Quotable Value’s housing valuations. It is quite common for questions regarding Rating Values RV (read also QV, CV, GV) to be asked by both buyers and sellers in the market place. And I believe that too much focus is placed on the RV figure by buyers trying to ascertain the market value of a property. Early on in my real estate career, I often tried to inform both buyers and sellers about the true nature of the Ratable Value and the dangers of trusting this figure as an indication of Market Value. I tell you, it is a hard thing to do!
I have long since given up trying to convince home buyers and sellers that the RV (Rating Value – not to be confused with Registered Valuation!) isn’t representative of market value because the myth is too ingrained. I am glad that we have moved away from calling the value GV or Government Value because this only perpetuated the myth that somehow this is what the Government believed your house to be worth. Rating Valuation is the best name for the value as opposed to Capital Valuation or Quotable Valuation.
I now go with the flow and work the system to help home sellers maximize their sale price by getting their Rating Valuation tweaked before putting their home on the market. Yep it can be done! Its called an urgent valuation update and costs around $200 from memory. I find that generally I can get the Rating Value up at least $20k and sometimes I have seen this figure jump almost $100k largely dependent on how much renovation has taken place in the house in question and how long it has been since a valuer actually entered the premises. As you can easily see, based on the belief that the RV actually means something, getting the RV up by this kind of amount has a large bearing on how buyers will assess value for the property when it enters the marketplace for sale.
Here is what Quotable Value says about Rating Values on their website…
The primary purpose of a Rating Value is to apportion the rates payable by property owners to their respective Councils. It was historically called a Government Valuation (GV) before the industry was deregulated in 1998, and is also sometimes referred to as the Capital Value (CV).
The calculation of Rating Values and how they impact on the rates is a complex process which can vary by council. Rating Values are calculated using mass-appraisal techniques supplemented with kerbside inspections and random internal inspections. This method of mass-appraisal gives a good indication of general property values and is cost-effective and appropriate for Councils purpose of allocating rates. Building consents or sub-divisions will also result in the Rating Values being re-assessed. When you receive your Rating Valuation notice there is a period of time where you can object to the valuation by supplying evidence to support why you believe the valuation is too high or too low.
Over time RVs have become utilised as property marketing tools, a role which the poor little RV never intended to fulfil. It is constantly being stretched between measuring capital gain, and the home-owner not wanting to contribute more than their fair share to the rate pool. Fundamentally, an RV is an indicative value snapshot in time. Yes, it easily goes out of date in a fickle market, but all properties in the same Council are on an even keel with the same effective date.
If you can’t used the RV as a price guide, how do you assess market value?
A good indication of the likely market value of a property can be gained by looking at the sale prices of recent (less than three months preferably) comparable (similar floor area, location, and renovation standard) properties. Though this will not give you an exact figure, it will give you a general guide for comparative value.
The new Real Estate Agents Act recognizes this as the best way to gauge the likely market value of a property. From November this year, real estate agents and licensees (salespeople) will be required by law to provide appraisals in writing that include recent comparable sales.
I quote from the newly revised Real Estate Code of Ethics
An appraisal of land or a business must be provided in writing to a client (seller) by a licensee (salesperson); must realistically reflect current market conditions; and must be supported by comparable information on sales of similar land in similar locations or businesses.
This is how the law describes the process of determining a likely market value of land (including any house or buildings on the land) or a business. There is no mention of comparing Rating Valuations or any such thing.
Another piece of the puzzle would be to look at the other homes currently for sale in a similar bracket. Buyers buy by comparison and make value decisions based on the homes currently on the market and what they offer based on asking price.
Things to remember regarding a Rating Valuation figure:
# It is a historical snapshot of your property at a point in time and is already out of date by the time you receive notification in the post. Wellington City Council is reviewing it’s Wellington real estate housing stock values this year in a couple of months time. This year is the transition year from annual revaluations to three yearly revaluations. The current Rating Valuations were assessed in September 2007. With the extreme change in the global economy that has taken place in the last 18 months, how can this figure be in any way related to value today? There will be greater opportunities to use the RV system to your advantage as a home seller when we move to the three year system because of the time between revaluations.
# The figure is primarily designed to aid the fair apportionment of the rates bill between all houses in a Council’s jurisdiction. As long as everyone pays a fair percentage of the rates, then the system is working. The RV figures do not have to necessarily be aligned to market value to work successfully as an apportionment system!
# The figure does not include an amount for chattels. And so it shouldn’t! Why should you pay more rates simply because you have bought a flash new stove or triple heatpumps or installed a spabath?!
# When renovating your home, the RV will not change unless you bring it to the Council’s attention. This process usually happens when you are doing work requiring a permit or consent. You can spend thousands of dollars cosmetically upgrading your home such as replacing carpet, installing insulation, buying new drapes, painting through etc without the Council ever knowing about it. Obviously, you would expect this renovation to lift the market value of your home, but it will not affect your RV unless you tell them.
#In most scenarios, the Rating Valuation figure is set remotely. This is known as a desktop valuation. How can anyone assess the true value of your home without at least doing a drive past? It may have been decades since someone has physically visited an address to assess it in terms of market value.
Interestingly, in my personal experience, if you hire Quotable Value to give you a market valuation (confusingly called a Registered Valuation (RV) as opposed to Rating Valuation (RV) ), the figure will be different than if you hire the same valuer from QV to redo your Rating Valuation.
A classic example of this happened to me only last month. A house I listed for sale had an RV of $340k. I didn’t feel that this was helping the owners because it didn’t reflect market value, so I suggested they get it redone. Unfortunately, when the valuer visited he thought the owner wanted a Registered Valuation (ie an opinion of market value). This opinion came out at $362k. When I found out, I told the owners to go back to Quotable Value as there had been a mistake made. I wanted the Rating Valuation updated. They obliged and the figure jumped from $340k to $370k. The house was sold a week later at $360k. A week after that the newly assessed Rating Valuations came out in the post. Our new RV of $370k got downgraded to $350k!
So after all is said and done, what is the real market value of this particular property? The sale price of course! $360k. All other figures are opinion only!
When selling, pay the $200 and get your RV revisited.
I am constantly amazed at how few other real estate agents suggest this to their prospective home sellers. Maybe these agents believe the myth as well?
You can download a form and read more about the Urgent Valuation Update here.
When the nice valuer visits make sure you give him a good cup of coffee, a freshly baked afghan, and an expansive tour of your home. Make sure your home is presented in a way that you would expect for an open home. Valuers are human beings! Unbelievable but true! Human beings respond emotionally to houses so make sure that the response of the valuer is good to your home. This will hopefully translate into a healthy optimistic valuation which will make it easier to achieve a premium price for your home. Have you ever heard this talked about by any real estate agent ever? Bizarre huh! And yet so simple!
Important! After this process has been completed. Don’t buy into the myth yourself! I have seen it happen too many times. The homeowner listens to my advice and gets their RV revisited, the RV goes up in value, and suddenly the homeowner believes that their house is worth more on the market than they did the day before. One fine example of this from last year was a couple with a renovated villa in Wellington. The RV was originally $475k, after the visit from the nice valuer person, the RV sky rocketed to $580k. I saw the glowing dollar signs in their eyes fade as I told them that it was not worth $580k but was closer to the original RV in value on the market compared with other homes that had recently sold in the area. They didn’t believe me and followed a course of action which saw them list their home with an agent who told them what they wanted to hear, fail to sell at Tender with this agent because the price was talked up too much, list with another agent and then spend just over a year on the market with many many open homes, advertising dollars spent, and buyer visits day and evening. Unfortunately, the market also dropped further during this time and they ended up selling a year and two months after our conversation about $15k below the level that I had first suggested to them.
If you are buying, forget the Rating Value!
Don’t be suckered into the belief that you are buying value if you can purchase a house below the RV. The best indication of value is the history of recent comparable sales in the area surrounding the home in question. Preferably these sales should have been completed within the last three months and will be filtered to show homes with a similar floor area, section size, location and age to the target home. You won’t know what the standard of renovation is like in the houses that are represented in the stats but a drive past of the homes in the list will give you a good feel. Ask the real estate agent representing the house for a list of such sales statistics.
As a buyer, if you have been actively looking at homes in a certain area of focus for at least a couple of months, you will be one of the more informed people in the market place in terms of market value.
Stick to your guns but read the market signs! If there are a bunch of people wanting to buy the house too, your comparative stats will be outdated. In order to buy the house, you will have to spend more than you think it is worth. Don’t muck around putting in an offer that throws you into the middle of the fair value melee. Go in with a mindset that you want to win. Put both feet forward in terms of a more than fair price, and minimal conditions.
If you have comments to make or you disagree with anything I have said here, please feel free to leave a comment! I value healthy open discussion.
July 09 2009 | General Real Estate and Home Buyers and Home Sellers | No Comments »