New Capital Values demonstrate an archaic system

by Alistair Helm in

Today, the 10th November thousands of Aucklander's reached for their web browser to witness the reveal of their latest Auckland Council Capital Valuation for their property. Far from horror or celebration the universal reaction was of frustration. Frustration because the majority could not gain access to the web server to discover their latest CV.

This experience in my view is unacceptable in 2014. We live in a world of ubiquitous, almost unlimited computing power - a world where you can through services like Amazon Web Services spin up unlimited servers to power any scale of usage at a fraction of the cost of most traditionally owned hardware environment, and only pay when you need it - like today as Auckland could have done to save loosing their whole website .

This experience is for me a demonstration of how archaic the whole Capital Valuation system is. I have in the past written about how we should get rid of CV's as they are a wholly misleading method of establishing a value on a property. Well now I think the experience of not being able to find out the latest Capital Valuation on my property demonstrates how we should re-examine the whole process.

I am not going to get into the political issues as to whether or not basing local authority rates on property valuations is right or wrong - but let's just say it is a fair method. How then could we improve it? 

The problem is that re-assessing values every 3 years is mad. Thirty years ago undertaking a re-valuation every 3 years was the best that could be done as the process to assess half a million homes took 3 years. Today algorithms can re-assess valuations every day if required. Zillow in the USA updates the estimated valuation of 100 million homes every couple of weeks - they are not a government agency - they are simply providing this insight next to property for sale to assist home buyers. 

Core Logic which is contracted to provide Auckland Council and most local authorities with a re-valuation every 3 years has a dynamic algorithm which re-assesses the property inventory of the whole of NZ at the flick of a button. They provide dynamic services to banks who use this capability to ensure they are constantly aware of the state of their lending portfolio. This algorithm takes input every day from recent sales, building consent data and registered valuers. It crunches these data inputs to create a re-valuation, house-by-house, suburb-by-suburb, district-by-district. This is the origin of the QV monthly report into valuation changes in property.

So why don't Council's use a 3 monthly re-assessment of capital valuations. The data is held by Core Logic they can simply take a feed of that data every 3 months. That way the "reveal" of new Capital Values becomes a less dramatic news story - I know the media will be disappointed in this as they have had a field day over the past weeks leading up to the latest reveal. 

For homeowners this new process would provide a genuine public service and demonstrate equitable rating apportionment as the annual rates would be based on a far more current assessment of relative value.