New rateable values are coming! What does this mean for you?
We are expecting rateable values (RVs) for Wellington City to be reassessed this year. The process in the past has been for the Council to ask Quotable Value NZ (QV) to do the assessment. QV run computer programmes which take into account sales in each area and base their new values on them. In the past, the new valuations have been sent out around November (usually every 3 years). They come with a set period for objections.
How are rateable values calculated?
We don’t know exactly but this is what we have come to expect…
The sales considered occurred long before November 2018.
The new rateable values take into account sales recorded as arms-length (rather than between related parties) in solicitors’ returns to Valuation NZ or LINZ. For sales to be counted they will need to have been settled and reported before the end of September and are therefore likely to have been confirmed by the buyers and sellers a month or more before that.
Chattels assessments can impact valuations.
The reported values are net of allowances for chattels. Allowances for chattels and fixtures and fittings are more rigorously assessed for investors as the values could have tax implications.
Completed permitted works affect valuations but not unpermitted improvements.
We understand these computer-based valuations also take into account the value of permits issued for the property that have reached completion and have had code of compliance certificates issued. However, if you have completed renovations that didn’t require consent, then these improvements will not be reflected in your new RV.
Will a large change of RV mean a similar rise in Rates?
Currently, sales prices in Wellington are commonly occurring at 50% or more above 2015 RVs. For many homeowners who have not been involved in the market, their new RV could come as quite a shock.
However, a higher RV does not mean a corresponding rise in rates. It is the relative values that count. If your RV has risen by a similar percentage to comparable properties in the city your rates bill may not change much. But if your area has become more popular with buyers setting strong prices, you are likely to see that reflected in your rateable valuation and your rates.
If you have paid for a revised RV from Quotable Value:
Quotable Value (QV), who carry out the formula-based reassessment for the council, also offer a service for homeowners whereby they can have their current RV reviewed, with a personal inspection included, for a fee (currently around $350).
In the past, many salespeople have encouraged their vendors to get their RVs reviewed and significant increases have nearly always been recorded. These revised RVs capture improvements within the property and the grounds and also the person doing them has often asked salespeople about recent sales levels of comparable properties.
In recent years a large number of properties sold in our area could have had their RVs increased through this process. Active salespeople often encouraged their vendors to do this as their experience was that the revised RV would be significantly higher than the 2015 original.
Note: This practice was a lot more common in 2016 when properties were selling closer to their 2015 RVs in general.
What does this all mean moving forward?
We have heard of occasional cases where some vendors have accepted sale prices on or below their revised RV, as this was often many thousands above their original 2015 RV. However, in most cases, houses are still selling well above their revised RV’s.
For the general revaluation, the RVs revised during 2017-2018 are treated as dated September 2015. Subsequent sales above or below revised RVs are treated in the formula as though they were above or below 2015 RVs and, with some variation (eg for types of cladding that have gone out of favour), applied across all properties.
In the revision formula, the recent sales to revised RV ratios may lead to a fall in recently assessed RV levels for some properties. This is contrary to the experience and expectation of salespeople and agencies working in the city. If this is a concern to you we recommend you take advantage of the period allowed for an appeal of the new computer-based RV.
If you are not thinking of selling in the foreseeable future a low RV could imply lower rates than otherwise might have applied.
If there is a possibility you might go to market in the next 12 months you could consider appealing the general revision as it has been applied to your property.