As a homeowner, you might be wondering how much your house is truly worth, especially if you’re considering selling it or tapping into its equity. One of the figures you’ll often come across is the Rateable Value (RV). But is this the best measure of what your property could actually sell for? In many cases, the RV can be quite different from the Market Value (MV), which is what really matters when selling your home.
Over the years, we’ve seen how RVs can easily give homeowners the wrong idea about their property’s actual worth. This blog will help you understand what RV is, how it’s calculated, and why it should be seen as more of a rough estimate than the final word on your home’s value.
What is Rateable Value (RV)?
Rateable Value (RV) is an assessment of the value of a property, determined by your local council, primarily for the purpose of calculating property rates. It’s important to note that RV is not a reflection of the current market value of your property, but rather a tool used by local authorities to allocate and determine how much you, as a property owner, should pay in local taxes (rates).
RV is composed of three main elements:
- Capital Value (CV): This is based on the recent sale prices of comparable properties in your area.
- Land Value (LV): The value assigned to the land your property sits on, derived from recent land sales in the area.
- Value of Improvements: This is the CV minus the LV, accounting for any structures or improvements made to the land.
In Christchurch, like in many parts of New Zealand, the RV is often the same as the CV, but this figure is only updated every few years. Therefore, it might not capture recent changes in the market or the condition of your property.
How is Rateable Value Calculated?
The calculation of RV involves a mass appraisal process conducted by the local council, typically every three years. This process compares recent sales data from the area to properties being valued. The council takes into account various factors such as property type, location, land size, and any consented improvements. However, the process does not involve an in-depth, on-site inspection of each property. Instead, it relies on general data, which can lead to discrepancies between RV and the actual market value.
Will I Get More or Less Than My RV?
It all comes down to what the market is doing. In a hot market, it’s not uncommon for properties to sell well above their RV. Buyers, driven by competition and limited supply, may be willing to pay a premium. Conversely, in a down market, where demand is lower and supply may be higher, properties could sell for less than their RV.
Market Value vs. Rateable Value: What’s the Difference?
Market Value is the price a buyer is willing to pay, influenced by factors like market trends, property condition, and location. It fluctuates with market conditions, unlike RV, which is fixed for a few years.
How is Market Value Determined? To estimate Market Value, real estate agents and property valuers look at:
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Comparable Sales: What similar homes in your area have recently sold for.
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Current Market Conditions: Whether it’s a buyer’s or seller’s market.
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Property Condition: The state of your home, including any renovations or unique features.
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Location: How appealing your neighborhood is, including how close it is to things like schools, shops, and public transport.
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Buyer Sentiment: Emotional factors that might make your home more appealing, like curb appeal, layout, and even the vibe of the neighborhood.
What Happens to Sale Percentages Over RV in Different Markets?
In a hot market, such as what Christchurch experienced in the years following the 2011 earthquakes, properties often sold well above their RV. For example, some homes were fetching prices 30-40% higher than their RV due to a surge in demand and a shortage of supply. However, during the market slowdown in 2023, many Christchurch properties sold for 5-10% below RV, especially in areas with lower demand.
More recently, in May, Opes research that Christchurch properties showed a slight recovery, selling 1% above RV. In other regions, Kaikoura and Ashburton saw homes selling 22% above RV, while Grey District reached 26% above RV. In contrast, Wellington City properties were selling 22% below RV, with declines also seen in Palmerston North (14%) and Hamilton (10%) due to a cooling market and rising interest rates.
Should You Rely on Your RV?
While your Rateable Value is a useful starting point, it should not be the sole figure you rely on when determining your home’s worth. For a more accurate picture, it’s essential to consider Market Value, which is influenced by current market conditions, buyer demand, and the unique features of your home.
If you’re considering selling your property, it’s important to get a professional valuation or consult with a local real estate expert. With Your Property Solutions, we can help you understand the true value of your property. By doing so, you can make an informed decision based on the most accurate and up-to-date information available.
Until Next Time,
Billy & Slade