Insurance
Buying insurance online vs using broker? What’s the right fit for me?
People often buy cover online because they think it’s cheaper and less hassle than talking to an insurance broker. What option is better?
3 min read
It’s often difficult to figure out how much to offer for a house. That’s especially true when so many properties sell at auction … it’s hard to know what the seller will accept.
That’s why many New Zealanders look at the Capital Value (CV) or Rateable Value (RV). These are the estimates of house values councils use when setting your rates and are often shown on property listings.
Property buyers pay attention to these numbers since they are shown prominently in online listings. That’s why you will often hear real estate agents try to set buyers’ expectations by saying whether properties are selling above or below CV. For instance, they might say properties are selling 5% above CV.
But there are massive extremes. Properties in some parts of the country are selling well above CV; properties in other parts are selling well below CV.
For instance, in May the average property in Wellington City sold for 22% below CV.
So, if a property in Wellington City has a rateable value of $1 million, there is a decent chance it will sell for around $780,000 ($220,000 less than the CV).
Other councils where properties are selling below CV are Palmerston North, where they are selling 14% under CV, and Hamilton where properties are selling 10% under CV.
However, in Grey District on the West Coast, the average property sold for 26% above CV.
Properties in Kaikoura and Ashburton are also selling 22% above CV, on average.
That doesn’t mean properties are undervalued in Wellington City or overvalued in the Grey District. It has more to do with how and when the CVs were set.
Most councils update their property valuations around every 3 years. If a council only recently updated its valuations there’s a good chance these estimates are relatively accurate. The property market may not have moved much since the valuations were set.
But, if the valuations are very old, the market could have moved considerably, making those estimates very out of date.
Wellington City Council last updated its RVs in September 2021, near the peak of the property market. Since then, property values in the capital have fallen 21.3%. So it’s not surprising the average property sold for 22% below CV.
It’s not that properties are cheap; it’s that the market has moved.
Interestingly, Grey District also updated its property values in September 2021. But since then property values there are up 25%. So, it makes sense properties are selling 26% above CV.
So, if properties are selling below CV, that doesn’t tell you that you’ve snagged a good deal. It just tells you that the council’s valuations are way out of date.
It also pays to remember that councils don’t put a great deal of thought into their estimates. They use data firms like Quotable Value or Opteon to provide estimates.
These are similar to other online estimates that you’ll see on websites like OneRoof. Home buyers know these online estimates are just a guide. It’s common for those online estimates to be out by at least 5-10%.
So, it pays to treat CVs like any other online estimate, except that these estimates could be 2.5 years old and out of date.
You’d never go online and look at OneRoof’s estimated value from 2.5 years ago and use it as a guide for what to offer on a property in today’s market. So, it’s generally a mistake to get too hung up on the CV or RV.
Our Resident Economist, with a GradDipEcon and over five years at Opes Partners, is a trusted contributor to NZ Property Investor, Informed Investor, Stuff, Business Desk, and OneRoof.
Ed, our Resident Economist, is equipped with a GradDipEcon, a GradCertStratMgmt, BMus, and over five years of experience as Opes Partners' economist. His expertise in economics has led him to contribute articles to reputable publications like NZ Property Investor, Informed Investor, OneRoof, Stuff, and Business Desk. You might have also seen him share his insights on television programs such as The Project and Breakfast.