I used to cringe every time I read a headline informing me about a property which had sold for a significantly higher sum than the CV – usually with the clear inference that the buyer had paid too much for the property seeing as they were paying more than it was actually worth.
Such headlines are rarer now that the market is flattening off – which is good, because they were invariably nonsense and demonstrated a lack of understanding of what a CV actually is – so let’s unravel the mystery.
Firstly – the letters. Depending on who you talk to CV either stands for Council Valuation or Capital Valuation. Feel free to take your pick from these options but these days the more correct term is Rating Valuation (RV).
What’s more important is what a CV / RV actually is. It’s a form of generalised valuation of all properties within a local authority area, once every three years, for the purposes of providing a ‘snapshot’ of the approximate value of any given property at that moment in time. Councils commission them for the purpose of providing a relative indication of value, between properties and suburbs, upon which they can set rates – and the glaringly obvious evidence of their tenuous accuracy is the fact that councils only conduct them once every three years. If they had to be exact councils would undertake them annually – but they don’t, because they don’t.
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It’s also worth noting that, even if they were accurate on the day they were issued – that figure starts losing relevance from that time. This means that, by the time three years have passed, the RV figure has been rendered meaningless as a guide to your properties value – and that would assume that it had robust legitimacy in the first place.
For these reasons, RVs shouldn’t be regarded as an exact measure of the value of a home. They’re more of a ‘guesstimate’ than a valuation and they’re certainly not intended to provide an ongoing price guide.
So, if a CV/RV isn’t particularly accurate – how can you know what your home is actually worth? The answer to that question depends on just ‘how accurate’ you want to be.
If you’re simply curious and have no specific purpose for which you require the information other than academic interest, then by all means take the CV/RV or any one of the ‘free’ online valuation services as a guide. The latter use a combination of the last RV, recent sales, and a bit of mildly sophisticated guessing to come up with a number and it should be treated as such.
However, if you’re selling your property or wanting to use the equity in it to borrow money you’ll want to have it valued more rigorously. This will put you in a stronger bargaining position if you want to sell.
A formal valuation is far and away the most accurate of the ‘pre-sale’ forms of valuation, but for obvious reasons, the only true gauge of what your property is ‘really’ worth will be the price that it achieves at sale.
- Ashley Church is the former CEO of the Property Institute of New Zealand and is now a property commentator for Oneroof.co.nz. You can email him at [email protected]
