Will rising house prices mean Aucklanders get whacked by huge rates bill?

Auckland Council is just months away from issuing the city’s new rating valuations, but homeowners expecting huge rate hikes on the back of soaring property values in the city shouldn’t panic.

CVs, or capital values, are assessed by Auckland Council every three years, but Covid-19 delayed plans for last year’s release.

Property prices in Auckland have jumped more than 20% in the last 12 months and OneRoof data shows the majority properties sold in city this year fetching more than 30% above their current CV.

James Wilson, director of valuations at OneRoof’s data partner Valocity, says CVs shouldn’t be used as indication of what a house is worth or will sell for, but nor should property values be used a sole indicator of how much rates will change.

CVs are simply tools councils use to help set the rates, he says. “The indication of the property’s value only makes up a relatively small portion of your overall rates bill – I think that’s important to note, because in reality their impact is quite low.”

Councils differ in how they make up the rates, Wilson says, but a core part typically includes services for the location you live in, like rubbish recycling, as well as your allocation for the waste and wastewater and also for things like footpaths.

And when it comes to the value portion of your home, it’s not so much what your home is worth that has the biggest impact but how your home compares to others in the area.

“If, for example, every single home in an area had a CV of $1m, that would have an equal banding in terms of your correlation to the rates you pay,” he says.

“If your property had a CV of $1.01m, you might find you don’t pay any more because you’re in the same banding as the property worth $1m.

“If your CV was $2m, however, you would likely pay a little bit more for your rates but it wouldn’t be double.”

Market value, on the other hand, is the price agreed between a willing buyer and a willing seller in open market conditions.

Wilson says while ratepayers have been questioning whether the expected substantial rises in CVs will lead to a big jump in rates, that’s not likely to be the case.

In the last revaluation in 2017, for example, values for the residential sector rose by 46 per cent – but general rates only increased by 2.5 per cent.

Wilson anticipates the latest revaluation may introduce new apportionments between Capital Value, land values and improvement values which take into account the fact land values are driving growth, with zoning changes facilitating further intensification.

Wilson told OneRoof it could be argued that particularly in Auckland CVs are having less and less relevance to the housing market because of the Unitary Plan, where one site might be cut into three new properties by a developer but a similar-sized site might be cut into six by another developer.

Australia, he adds, also has CVs, but many states don’t release them to make sure they don’t have an impact on the property market.

“I think there are pros and cons to that but potentially you could argue not having them available creates less, I suppose, politics when it comes to resetting them at times like this.”