Council valuations are past their use-by date. It's time to move on.
The valuations don't reflect the the current market value because they were released a full year after the actual valuing took place.
OneRoof estimates that in that year, property values have changed between -9% and +8% depending on the suburb.
Nick Goodall, head of research at Core Logic, went so far as to describe the CVs as 'old news'.
So, the council has dropped a seemingly official figure into Auckland's property market that is actually more than a year old.
Perhaps the market will simply ignore the new CVs. On the other hand, the year-old values might confuse the market, resetting some of the shifts from the last 12 months.
Aucklanders are supposed to ignore the valuation part of the council valuations, and only use the CVs to understand what will happen to their rates.
But wait: just because your CV went down doesn't mean that your rates will go down!
CVs are not directly related to rates. Changes in rates depend on the amount of money the council wants to raise and the CVs are used to distribute those rates among the ratepayers.
The council doesn't need to release outdated property values to calculate, or communicate, how rates are distributed.
They simply need to rank the properties of Auckland in order of value and use their relative ranks to calculate the rates.
This would be more informative to rate payers. A decrease in relative rank might mean a decrease in rates - although currently it's more likely to simply mean less of an increase.
And conversely an increase would mean you are going to shoulder more of the city's rates burden.
Currently, the valuations don't even give that level of information.
They force the council to expend resources explaining why your rates are going to move in the opposite direction of your valuations.
Releasing council valuations is a poor way to communicate rates changes.
They aren't timely enough to help the market, and they may even disrupt the market - so maybe this should be the last time they are released.
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RNZ News
4 days ago
- RNZ News
Are property valuations still the best way to allocate rates?
Photo: 123rf As Aucklanders digest their new property valuations, questions are being raised over whether using these CV's are the best way to work out rates. The calculations released yesterday are already 12 months old, and council staff say they are not necessarily a true reflection of a homes value. The valuations showed an average drop of 9 percent across the city's 630,000 homes. But they will be the basis of rates calculations over how to distribute payments among ratepayers. Some have suggested that there might be better ways to work out how much each household should be contributing toward the cost of running the council. So are CVs useful as a rating tool? Kathryn speaks with Nick Goodall of Cotality, formerly CoreLogic.
NZ Herald
5 days ago
- NZ Herald
Council valuations are past their use-by date. It's time to move on.
The valuations don't reflect the the current market value because they were released a full year after the actual valuing took place. OneRoof estimates that in that year, property values have changed between -9% and +8% depending on the suburb. Nick Goodall, head of research at Core Logic, went so far as to describe the CVs as 'old news'. So, the council has dropped a seemingly official figure into Auckland's property market that is actually more than a year old. Perhaps the market will simply ignore the new CVs. On the other hand, the year-old values might confuse the market, resetting some of the shifts from the last 12 months. Aucklanders are supposed to ignore the valuation part of the council valuations, and only use the CVs to understand what will happen to their rates. But wait: just because your CV went down doesn't mean that your rates will go down! CVs are not directly related to rates. Changes in rates depend on the amount of money the council wants to raise and the CVs are used to distribute those rates among the ratepayers. The council doesn't need to release outdated property values to calculate, or communicate, how rates are distributed. They simply need to rank the properties of Auckland in order of value and use their relative ranks to calculate the rates. This would be more informative to rate payers. A decrease in relative rank might mean a decrease in rates - although currently it's more likely to simply mean less of an increase. And conversely an increase would mean you are going to shoulder more of the city's rates burden. Currently, the valuations don't even give that level of information. They force the council to expend resources explaining why your rates are going to move in the opposite direction of your valuations. Releasing council valuations is a poor way to communicate rates changes. They aren't timely enough to help the market, and they may even disrupt the market - so maybe this should be the last time they are released.
Newsroom
5 days ago
- Newsroom
Why our rates are rising as valuations drop – and the wealthy exceptions to the rule
Analysis: Howls of pain are emerging from Auckland as homeowners compare the declines in this week's new rateable valuations with the rises in their rates bills, taking effect from the start of next month. My family lives in Onehunga. This week's new figures show our home's rateable valuation is down 8 percent on 2021, yet our rates will rise about 5.8 percent ($315) from July 1. Add to that a 7.2 percent hike to Watercare charges, and it's costly. (Not everybody's valuation has diminished. For instance – and for the property voyeurs among us – the capital value of the Mowbray mansion in Coatesville has increased 3 percent, from $39.3 million to $40.5m. The CV for the former Hotchin mansion in Ōrākei has jumped from $58m to $72.5m.) On average, Aucklanders' CVs have dropped 9 percent. And while Auckland's cries may echo loudest, because there are more of us, the discrepancies are even more stark elsewhere in the country. Wellington residents, for instance, will pay on average 16.9 percent more in rates, even though their property values have dropped 24.4 percent – a big chunk out of their wealth that will push some into negative equity (on the books, at least). The Mowbray mansion in Coatesville has increased from $39.3 million to $40.5m. Nelson locals face a 6.5 percent rates rise, despite their house values dropping 9.4 percent. Understandably, homeowners' realisations that they are are less wealthy, yet they're being asked to pay more, will harden opposition to rates rises. And that will shape the political debate in October's local elections. Christopher Luxon's Government has told councils to 'get back to the basics' of fixing pipes, filling potholes, and delivering core local services. Challenger local candidates who promise to rein in rates rises will no doubt get a more sympathetic hearing from local electors; those incumbents who are aware just how hard that is will struggle make their arguments heard. But let's set aside some of the spin and look at this more dispassionately. Rates hikes v residential property valuation changes The ways in which central government taxes and local government rates are set are critically different. Central government starts with tax rates (PAYE, company tax, GST, etc) then asks revenue officials to make an informed guess about what that rate will raise. If my gross earnings increase, I pay more tax – but generally I don't complain too much because I can see it's a consistent rate. Every year, as individual and company earnings and expenditure increase, the Government takes a bigger clip from a bigger ticket – and that helps cover its increased costs servicing a growing population. What this means is that the Government increases its tax take every year, without having to make any active decision. The passing of the Budget Appropriation Bill does not require MPs to vote on increasing tax revenue. MPs don't face the wrath of those who elected them, for voting in favour of a tax revenue rise. It just happens. Every year. Local government is required to work the other way round. It predicts how much money it will need to service its own growing population, then works backwards to decide how big an increase in rates revenues is needed to pay for that. What this means is that when your house value rises, increasing your equity and making you more wealthy, that doesn't flow through to paying more rates. All it does is slightly change the share you pay of your city or district's total rates bill, relative to your neighbour whose house value may have declined. The net effect is that over the past century, tax increases have massively outstripped rates rises, leaving local government genuinely struggling to pay the bills. Tax v rates as a percentage of GDP The Government's tax take relative to GDP has soared, while council rates have remained static. Source: Productivity Commission That's why Auckland Mayor Wayne Brown, this week, is putting the hard word on the Government to allow the city to charge bed taxes to fund tourism infrastructure. That's why Local Government NZ and its members (61 of the country's 67 city and district councils) have been pushing for new revenue tools, like a share of local GST take, or the ability to charge rates on Crown estate. That's right, even though the Government's books are in a much healthier state than councils', and its debt is lower by global measures, it still exempts itself from paying rates. So, as the local government elections roll around in October, by all means hold your councillors to account on their spending and the rates rises they've imposed – but listen cautiously to MPs who punch down on cash-strapped councils. Be sure you're comparing apples with apples – because the big picture is, successive governments have increased their tax take far faster than councils have hiked their rates.
