Institute of Valuers President supports Government's proposed earthquake recovery programme

The President of the New Zealand Institute of Valuers (NZIV), Ms Nicki Bilbrough, says the Institute supports the Government’s proposed earthquake recovery programme announced by the Prime Minister.

The Government’s proposal to use the August 2007 rating valuations for the basis of payouts is probably appropriate for most home owners as 2007 was at the peak of the residential property boom and house values have subsequently retreated from this high point . Also, in some cases, the Government’s offer appears to pay out land values at more than EQC’s cover of $100,000.

Ms Bilbrough, however, cautioned owners that rating valuations were the product of mass appraisal methodologies. This method of assessment is more accurate in areas of consistent housing stock, i.e. of similar age, size and construction. Rating valuations are set on a specific date and do not necessarily reflect market value as at 4 September 2010.

The following table compiled by NZIV with information provided by Headway Systems Ltd compares sale prices of properties sold in the red zones during the 12 months immediately proceeding 4 September 2010 to the rating value of those properties.

Suburb No. Sales analysed Mean Sale Price Medium Sale Price Mean RV of Sales Ratio Mean Sale Price / RV
Bexley 98 $237,388 $217,750 $253,343 .937
Richmond 135 $287,164 $285,000 $291,400 .985
Horseshoe Lake 67 $309,664 $285,000 $320,224 .967
Wainoni 59 $272,742 $250,000 $264,797 1.03
Dallington 101 $305,799 $285,500 $316,584 .966
Avondale 185 $346,426 $328,000 $358,108 .967
Avonside 102 $282,159 $280,000 $290,383 .972

The above analysis shows that properties within the red zone that sold before the September 2010 earthquake have, in general, sold at levels below the 2007 rating valuation.

The perception of some property owners that property values have increased since September 2010 and that they maybe out of pocket if they accept the rating value option, could be due to demand for undamaged properties since the September earthquake and an increase in property values for such properties. If there is sufficient stock to meet the increased demand from red zone owners, then prices should not be unduly inflated.

Any building alterations, extensions and refurbishments since August 2007 may not be reflected in the rating valuation and although the Government has indicated owners can provide receipts for improvements, the improvement in value may not be adequately compensated for. Ms Bilbrough suggests the rating valuations will make a good basis for an “interim” pay-out but property owner s should have a right of appeal or to seek independent advice on the market value of their property.

Ms Bilbrough recommends that owners who believe that subsequent improvements to their properties have increased the market value should discuss their situation with a local Registered Valuer.

About the Property Institute of New Zealand (Inc)
The New Zealand Institute of Valuers merged operations with the Property Institute of New Zealand in 2000. With over 2800 members throughout New Zealand and overseas, the Institute is the voice of the property profession. The Institute represents the interests of Registered Valuers, Property and Facilities Managers, Property Advisors and Plant and Machinery Valuers. Professional education and development is at the heart of the Institute and as a professional organisation it benefits the industry when we can assure clients and members of the public that competence is maintained and improved by an adequate process of Continuing Professional Development.
The Property Institute applies its resources to the promotion of best practice, standards, and ethical conduct. The Institute recognises that these key areas will strengthen the property industry.

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