Rateable Valuation vs. Market Valuation

Obviously, there are less boring things on God’s green earth to talk about than Rateable Values (RV), but it’s an important subject nonetheless. Common misconceptions of the true meaning and a bombardment of other acronyms have left a few, well, misguided.

RV is also sometimes known as the Government Valuation (GV) or Capital Value (CV) and it consists of two components – the Land Value (LV) and the Improvement Value (IV) (buildings, fences etc.). The LV component of the RV is used by Local Authorities in the Far North to apportion rates amongst rate payers and it is calculated every three years based on the recent sales values of land and houses. It represents a single point in time and therefore does not reflect the dynamic nature of market forces such as supply and demand. A Registered Property Valuation done by a Registered Valuer is not an RV, but is certainly a step up in accuracy as this involves a site visit and takes into consideration a great deal more detail and is more specific in nature.

Real estate agents often mention the RV in advertising because buyers often like to know the figure. Sometimes, the RV is a rough guide of the Market Value but other times it is completely irrelevant. The RV's relationship to Market Value is ultimately up to you to decide. When deciding though, consider this:  the RV doesn't usually take into account anything that makes a property better or worse than others in the area. For example, the condition of the house and land, chattels included, landscaping improvements and so on.

It is for this reason, that sometimes an RV can seem inaccurate, especially when a house has recently been renovated, or when a property is unusual. Home owners can choose to get their houses re-assessed by the local council if they feel that it is unsuitable. Going by the previous example, if a house has recently had renovations that required a building consent (especially if there has been an increase in the floor area), the house will automatically be visited by a QV Valuer and the RV will be adjusted appropriately.

An easy way to think about this wonderful web of funny business is this:

When properties sell below RV, we are more likely in a buyers’ market with low demand and high supply. When properties sell above RV, we are more likely in a sellers’ market with high demand and low supply. Currently, we are the later.

Therefore, RV’s should not be looked at in isolation, but must always be looked at in conjunction with Market Values in order to get an accurate grasp on the state of the current market.

The graph below clearly demonstrates the volatility over the years when comparing Market Values vs. RV. Thanks to our graphical guru Vince Buxton for pulling the stats together!