The government valuation of a property, otherwise known as the rateable value or sometimes known as the CV in the case of Auckland, is the automated process whereby a value is applied to every address (comprising a land value and an improvement value) in an effort to fairly apportion local government rates. Like it, or hate it, rates needs to be levied on property / land owners and the method most commonly used is apportionment based on value.
As to the value or relevancy of this automated valuation in relation to the market price of property for sale, that is a subjective debate. Especially nowadays given the freely available automated valuations from the likes of Homes, Trade Me Property Insights and MyValocity. These valuation assessments are updated at least monthly whereas the process to establish rateable value is only undertaken on a 3 year cycle.
That being the case you would assume that the notion of a rateable value had become somewhat obsolete, relegated to the museum, much like Imperial measurements. That’s far from the case as the media is awash with references to RV / CV and no conversation with prospective buyers at open homes is complete with the question as to the property’s current CV.
The fact is that whilst recognised as being out of date as soon as it is published, the CV / RV of a property is a benchmark, and one anointed with the officialdom of local government which is why it perpetuates.
So now to some interesting analysis. In years gone by and especially in the most recent property boom of 2011 to 2016 and most especially in Auckland, the question has always been how much over CV were properties selling for? Was it 30% … 40% … or even 50%, such had been the accelerated inflation in property prices over the course of just a few years.
The fact is that by the time of the 2017 re-valuation process, Auckland CV’s generally were out of touch with sales prices by as much as 48%. That comparison to the CV by the time of the re-valuation was also the same during the prior period of 2011 to 2014.
The chart below tracks the median sale price in Auckland during the elapsed months from the re-valuation tracking the 2008, 2011 and 2014 re-valuations. The 2008 revaluation which is tracked in the chart from 2009 onward (as new CV’s are published in November) was noteworthy for the completely flat market during and immediately post GFC.
Now, if we add in the data for the past 18 months since the new CV’s were published at the end of 2017, the picture is revealing. At May of this year with the latest data from the Real Estate Institute we see that the median sales price of property in Auckland is running at a 5% drop compared to CV and heading on a trajectory that is well below the post GFC period of 2009 to 2011.
The question will soon be asked as to the re-valuation due to be undertaken a year from now in Auckland as to whether the re-evaluated CV’s might be lower than the 2017 figures. That would come as a shock to many, I suspect.