Difference between rateable and market value
What is rateable value?
Rateable value (RV) is the ‘value’ of a property set by the local authority for the purpose of determining and allocating rates. It is made up of three components:
- Capital Value (CV) - based on recent comparable sales in the area
- Land Value (LV) – based on recent sales of vacant section in the area
- Value of Improvements – the CV minus the LV.
Auckland Council rates are based on capital value, so in the Auckland region your RV is the same as your CV.
The RV (or CV) is the value of a property at one given date, based on properties that have sold around the time of that one given date. It used to be referred to as a government valuation (GV).
The last general revaluation was set at 1 July 2014, and the next one will be in 2017. Home owners were notified of their new valuation in mid-November and these are still available on the Council's website.
What are the 'value of improvements' they refer to?
Improvements refer to anything that is on or for the benefit of the land. This will typically include the home that sits on the land, the landscaping, driveway, etc, or if it's a section, any work completed, such as services installed, landscaping or driveway access.
How does the council decide on the probable price of a home?
To calculate rateable value, the Council undertakes a mass appraisal valuation exercise comparing recent sales in an area to the property being valued.
The Council holds information for each individual property such as property type, location and land size, zoning, floor area, views, consented work (such as renovations), and many other factors.
So is this the 'value' of a home...or not?
The council are very clear that the revaluation process is not done to provide values for property owners - for marketing, sales or any other purposes. It is done primarily for rating purposes and the Council are required to do this by law.
And because not all factors are considered - for example, work carried out that didn't require a consent, redecoration, chattels and appliances - the rateable value is not the best way to calculate what a home will sell for in the open market.
That's where market value comes in
Market value is the probable price a home would sell for at any given date and can be affected by market factors at the time, including things like:
- Supply and demand - the number of homes available vs the number of buyers looking
- Interest rates
- The existing and potential use of the land
- The economy - including local, national and international factors.
When trying to work out the value of a home, you’ll also want to take into consideration emotional factors that impact on buyers, like visual appeal, neighbourhood vibe, and access to schools.
How can I work out the market value of a home I'm interested in?
There's no exact recipe, but if you do your research, you'll have a much better understanding of the likely price range homes are selling for in the areas you're keen on. Here are a couple of tips:
Talk to a real estate salesperson - and become an expert on your chosen area/s
Real estate salespeople know how much homes are selling for in your desired area/s at any given time. They know what your competition looks like, and they have access to market data, including comparable sales.
They can also provide you with information on the buying process, including how to bid at auction. Talking to a salesperson is a great place to start if need help understanding and estimating market value.
Get a private valuation by an independent registered valuer
Registered property valuers are impartial and independent property professionals who are qualified and trained to assess the market value of your property.
They should have in-depth knowledge of the real estate market, particularly recent sales in your area and an understanding of building methods, architecture and style. They’ll also be familiar with district plans, the RMA and government legislation.
In some circumstances, an independent registered valuation will be required by your bank as part of your mortgage approval.
Need more help?
If you’d like to know more about market value, talk to a Barfoot & Thompson salesperson today.
When it comes to researching and buying a house, it’s important to understand the difference between rateable value - set by the council - and market value, which is what buyers (like you) are prepared to pay on the day.