Property Institute warns against spending spree based on new CV

Property Institute of New Zealand Chief Executive, Ashley Church, has strongly endorsed a warning, by new Housing Minister Phil Twyford, that Aucklanders should not go out and binge on the basis of big increases in the Council-assessed value of their homes.

The new Council Valuations on Auckland homes will be available on the Council website from 9am tomorrow but Housing Minister Phil Twyford has warned that it would be unwise for Auckland home owners to assume they've hit the jackpot based on the large increases in values likely to be reflected in the new assessments.

Mr Church agrees that Aucklanders shouldn’t read too much into the council figures and has repeated his recent reminder that they are a ‘guesstimate’ rather than an accurate indicator of what a home is actually worth.

Councils throughout New Zealand are required to update Council Valuations (CVs) on residential, commercial, industrial and rural land once every three years in order to set rates and Mr Church says that there is a common misunderstanding about what this Valuation is and how much weight should be placed on it.

“CVs are conducted once every 3 years and they’re a ‘snapshot’ of the approximate value of any given property at that moment in time. They shouldn’t be regarded as an exact measure of the value of a home – and they’re certainly not intended to provide an ongoing price guide”.

Mr Church says that the methodology for a Council Valuation is very different to a formal valuation.

“A CV is a blunt instrument. It’s a computer based assessment of the value of your home based on what other homes in your area have sold for – whereas a formal Registered Valuation is conducted onsite and takes account of the condition of your home, any renovations you might have made, whether you have a pool, the number of bedrooms you might have, the condition of your home – all of the things that make it unique. There’s no comparison between the two”.

Mr Church says that, for many people, the Council valuation of their home is matter of curiosity and academic interest – but he says that some people might see it as a measure of wealth and be tempted to go out and spend on that basis.

“That would be a mistake”.

He says that, while there’s little doubt that home values have increased substantially, people should be wary of taking on major new debt unless they have an accurate idea of what their home is currently worth.

“A CV won’t provide that”.

“If you’re selling your home or wanting to use the equity in it to borrow money it’s important that you get your property valued formally. This will put you in a stronger bargaining position if you want to sell – and any increase in value could give you more clout with the bank if you want to borrow money to make a purchase or buy a business”.

Mr Church says that the question of the value of your home has also been further confused by the recent proliferation of ‘free’ online home valuation services.

“There are a couple of paid services that are getting much better at remote assessment – but the free ones are generally about as effective as reading tealeaves or chicken entrails and their advice should be treated with a grain of salt”.

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