GV vs. Market Value

[exnzpat]

I’m interested to know what people think about the local councils, and how they will handle falling home prices.

When I use the term “market value” I’m referring to the price someone else is willing to pay you for your home.

Question: Will they re-rate homeowners GV’s if house prices fall?

Any ideas?

For those of you who don’t believe home prices will fall, then please treat this as a hypothetical question.

[Monid]

Yes, but not specially for the occasion. Instead when the revaluations come around (every few years) if the price has generally fallen, then the property revaluations will go down. It is mostly irrelevant since the main use of the GV (Other than to make punters think their house is worth x) is to provide a comparative value with other houses inside the council region for rates purposes. As long as the comparative ratio between values stays the same any change positive or negative doesn't matter.

Cheers
David

[tricky]

Yes, as well.
And sorry to disappoint you - it is no big deal.
Why would the councils 'handle' a drop in value any differently to a rise in value?
They rerate every homeowners gv every time they carry out the exercise.
It happened back about 1998 - I know a particular gv went from 485k to about 455k.
No one got hurt.
The rates stayed the same.

[Mark_B]

And sorry to disappoint you - it is no big deal.

Tricky is 100% right.

Council's use what they call a "rate in the dollar" to collect a predetermined amount of rate income.

Across their area (be it a city or a district) they know the total GV (of all rateable properties combined) and, of course they know how much rates they want - so they run a little program (similar to a goal seek in excel - in fact some councils do use excel) which tells them which rate in the dollar they need to charge to raise the rates they want.

If you held the total desired rates constant and GVs rise, then the rate in the dollar falls.

If you held the total desired rates constant and GVs fall, then the rate in the dollar rises.

M

[exnzpat]

So, rates are not tied directly to the value of your home? Or am I misunderstanding the term GV?

[Mark_B]

So, rates are not tied directly to the value of your home? Or am I misunderstanding the term GV?

GVs are used for rating (though some councils use land values [unimproved], others capital values [improved]).

And rates are tied to the value of your home - relative to the value of other rateable properties.

Take the example of a council that wants to strike its rates to achieve $X dollars. If the GV of all rateable properties falls by 10%, then the rate in the dollar required to generate $X dollars will have to rise by 10%. In that case - everyone would pay the same amount of rates that they did before.

Of course that is not what happens in real life. What actually happens is that when the GVs are reviewed every 3 years by QVNZ some props go up (or down) by different amounts. When that happens (and I am holding the rates strike constant here - $X) the amount of rates you pay is determined by the value of your property relative to others. If your value is relatively down - you pay less (at least proportionately). If your value is relatively up - you pay more.

But those sorts of adjustments only happen every 3 years (as I said, when QVNZ re-examines the valuations).

But to return to your original question - Council's are unaffected by falls (or rises) in property values. They still collect their rates, the only difference is how the pie is divided up between various types of property (resi, commercial, industrial, retail, mining, farming, etc).

M

[Scott Miller]

GV verse my 6 month old RV

As you guys are aware Christchurch property owners have recently received there new GV's.

My question is how do you think I stand with the situation I now find myself in.

In June this year I purchased a buy and hold property, 680 sq's on L2 land for $460,000.00 that I rent out on a room by room basis right next door to the Uni and T/col.Before you ask it's CF neutral.

Two weeks ago I received my envelope in the mail from the CCC and couldn't believe my eyes when I realised the GV was $380,000.00. Initially I thought hooray my rates will not increase that much... and then I got thinking, if registered valuers take GV's into consideration when completed their reports, how will this effect my next equity release on the house.

I know the house was worth slightly more than what I paid for it six months ago.

So do I:

1) Not worry about it, as the valuer will know what's what and do the right thing?

2) Ring up the council and ask them to increase my GV to reflect the houses true value, and then pay the extra rates due?

A little teaser for the festive season.

[Mark_B]

Scoob

GVs done by QVNZ are (to be honest) a bit of a joke. Thankfully, however, the errors are more systemic than random.

It is not uncommon for a revised GV to fail to reflect a sales price as you have noted. It happened to me earlier this year. A place that we owned (and bought for $250k [that had a valuation at the time of $285k]) had it's GV increased from about $80k to $200k (coastal property).

If we had wanted to be myopic and save a few dollars on our rates we would have left it at that. But we have plans for this place and we run a property portfolio so it makes far more sense to do whatever we can to get the GVs up as high as possible (valuers and REAs do often refer to them ).

So I wrote a letter to QVNZ (I dont think it can be done just with a phone call) and attached copies of the S&P agreement and registered valuations and stated my reasons to get the GV increased. For memory I had asked for a new GV of around $315k or so. They replied, made a time to inspect the property in person, and later informed me that they had reconsidered their assessment and that the new GV was now $250k (ok, so not $315k, but better than $200k). So as a result we pay a few hundred extra in rates each year (compared to if we had kept our mouth shut) - but at least if we do decide to either sell this property or develop it then I can point to a higher GV. It just makes it alot easier for us medium-long term.

But that was us.

Your property, your choice (but as I said, afaik you will have to make your case with QVNZ).

M

[artemis]

There is an online form on the QV website to lodge an objection to a RV. I have recently lodged 3 objections, requesting a significant downward RV in each case. In case you are wondering, there are some specific circumstances involved here. Not just doing it to save a few dollars on rates.

[lissie]

We bought a property a few years ago in Wgtn - it hadn't been sold since the 60's so the GV was way way too high - I think they assumed that the house had been updated over the years - it hadn't We bought under valuation and then renovated to the tune of $100k - the GV was then updated to reflect the building consent. We objected included the val we got at purchase and the S&P agreement and got the GV down to something reasonable. We arent planning on selling for 10 years so Im not interested in paying extra rates. Our valuer just laughed at the GV - said its quite common for them to be way out when the house has sold for a long time

[JohnL]

When banks look at the equity in a portfolio, they would use the GVs or RVs, depending which is higher. So unless you want to be agressive and pay for RVs everytime you want to borrow back up to 80% or so, then GVs can be useful on houses you have owned for a long time and haven't had revalued.

Sometimes its useful when looking at local sales stats in seeing whether a particular house is worth pursuing. If the average sales in an area are averaging 25% above GVs and the house you are interested in is listed at GV then it may be worth a look!!! Can be useful in an area you aren't familiar with.

Apart from that, I can't really think of a reason to worry to much about the GVs.

John