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If properties across the country are as individual as the people who live in them, then why do so many use council valuations as a guide to sale and without them just how do we determine value as the market shifts?

The latest sale results across Auckland and Northland show that while new listings are at their lowest levels since 2014, record sale prices are still achievable – all while population growth continues to outstrip supply and mortgage rates remain comparatively low. Despite the enduring market conditions which are said to be the most preferable this generation, the balance of power has begun its inevitable swing as we head toward a period which will offer buyers more opportunity.

Determining value is the most challenging factor facing both buyers and sellers today, with many turning to Government tools such as the council valuation (C.V) for insight as to what can be expected come sale time.

However, it is important to understand what these tools are used for before applying their methodology elsewhere. C.V’s for instance are the value of a property generated by its local council in order to set rates for the coming year.

Council valuations are revised every three years with the new rating year beginning recently on 1st July. With this, homeowners can expect their new valuations (and apportion of rates) around mid-November. And if the last round of C.V’s are anything to go by, local councillors can expect a deluge of requests for reassessment.

Using mass appraisal computer generated estimates, often sight-unseen by council officials, these valuations have been set according to relevant recent sales and any known consented work, subdivision or zoning changes.

Unfortunately, using an algorithm to determine value in a market moving by the day poses a troubling question – just how relevant are these C.V’s?

After the last round of valuations were released in November 2014, many across various professional sectors including real estate, finance and law called for the mass appraisal system to be overhauled as the gap between a C.V and the sale price of properties across Auckland and Northland became too large to excuse.

During this time the Auckland City Council assessed more than 520,000 properties, the vast majority of which were residential. Of those assessed, approximately 10,000 challenged their recent revaluations, with more than 70 percent of those applications for review successful.

Sale values across the region were said to have soared by 34 percent during this time, which we now know as one of the most buoyant periods for housing value increases the country has seen. Despite these widely reported value gains, approximately 40 percent of those seeking review were in fact requesting a drop in their C.V in order to secure a lesser apportion of value and a reduced rates bill.

Last year, research conducted by data and valuation firm My Velocity revealed that properties selling in Auckland were netting on average 37 percent more than their C.V. Leading many to speculate as to the role which intensification will play in this round of revaluations because sale trends have shown properties in preferable zones (with more options for redevelopment) typically sell for more in the current market.

According to homes.co.nz, in Auckland more than 50 percent of the properties sold within the last 12-months have been in high-density, mixed housing urban zones, illustrating the appetite for property with options. Across these property sales, the average eventual sale price exceeded the 2014 C.V by more than one and a half times.

With the Auckland Unitary Plan (operative in part) approved last September, and much of the region’s suburban sprawl re-zoned to make way for greater development, this years’ round of C.V’s are positioned to be the most perplexing model yet.

Much like the methodology behind the auction process which relies on buyers in the room to determine a property’s market value, council valuations do not buy property – people do, and people have a far different set of matrices for establishing value. Therefore, mass appraisals of this nature, which are used to calculate how much an owner should pay in rates are irrelevant to reflect true market value.

To calculate the value of your property, it is clear that the specific knowledge of a professional are necessary. Your salesperson will be able to provide confident, informed advice as to your property’s estimated value and it is now common-place for sellers to secure an independent valuation of their property, following an inspection, appraisal of unique features, refurbishments and other aspects which could influence the sale price.

The Auckland City Council has been very clear about appropriate use of its C.V’s and while standing by the application of their matrices, it impresses that the system is designed specifically for rating purposes and does not constitute an accurate measure of market value.

In past years, C.V’s have been one of the only public measures of value and now with the rise of technology and an interest in property greater than ever before, there are many independent assessment tools available on the market which are updated as frequently as monthly to reflect more accurate sale values. Despite this, engaging a professional remains the most reliable way to secure sound information and as the market ploughs ahead, buyers and sellers are advised to refer to knowledge and expertise in the absence of certainty.

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