Auckland rates shock - how hard will you be hit?

Those whose properties have fallen in value during the downturn could get a rates cut. Photo / Richard Robinson

Property owners in a band of central Auckland suburbs have enjoyed a leap in the value of their homes - but they will soon be paying higher rates as a result.

While values in many parts of Auckland have dipped through the real estate downturn over the past two years, those in suburbs such as Grey Lynn, Ponsonby and Westmere are well above rating capital values set in July 2008 - the last time their property valuations were set.

That would mean a leap in rates bills next year when the expanded Auckland Council bases rates on an assessment of the capital value of 514,000 properties done last month.

Capital values are the probable selling price of a property, less chattels.

Those whose properties have fallen in value during the downturn could get a rates cut.

A council team working with Quotable Value is in the final stages of assessing the new capital values, to be delivered to ratepayers in October.

Of the seven local authorities making up the new city, only Franklin previously used capital value as the sole basis for its rating system, although a major component of the Auckland and Manukau annual value system was linked to CVs. North Shore, Papakura, Rodney and Waitakere opted for land value.

The move to capital value was required by the legislation establishing the council.

Council officers will be under political pressure to ensure there are no big jumps in rate liability favouring one area over another after the switch.

Who will pay more and who will pay less is difficult to pinpoint, because of the change in the system and the fact that the seven previous local bodies had varying dates for their three-yearly valuation reviews.

Rodney and Waitakere were last reviewed on September 1, 2007 at the height of the real estate boom. Auckland was rated on July 1, 2008, Manukau and North Shore on September 1, 2008, Franklin on July 1, 2009 and Papakura on September 1, 2009 - when the market was falling.

But average price rises across a suburb will not translate into a similar level of valuation increases for all properties in the area under the mass-appraisal system.

For example, the Valuer-General has revealed he expects the value of homes built of materials implicated in the leaky homes debacle to be written down. That means houses next-door to each other with identical existing CVs may end up far apart.

As well, the formal capital values will be guided by local sales in the three months to July 1, not the average quarterly performance over the full year the Herald has used for its analysis.

However, the Herald study gives a fair guide to the suburbs that have gained or lost in value.

INDICATORS

QV's residential property index gives some broad pointers, showing these results to July 31 since the peak of the boom late in 2007:

* Prices in the old Auckland City Council suburbs: up 1.3 per cent.
* North Shore: down 1.6 per cent.
* Waitakere: down 3.9 per cent.
* Manukau: down 3.2 per cent.

The council valuation team expects most of the 2011 CVs to fall in the plus-or-minus 10 per cent range, depending on when the previous values were set and the strength of the local market.

CATEGORIES

Ratepayers will fall into one of three categories after the CVs are set:

* If a property rises in value by more than the average across the city, the rate increase will be greater than the average.
* If the property rises in value by the average, the increase will generally be at the average level.
* If the property drops in value less than the average, the rates may not rise, and may even drop.

Local selling prices in the build-up to the review date give valuers their strongest lead in setting CVs.

INNER CITY UP FOR BIG JUMP

A Herald analysis comparing sales in the year to June with the valuations of the properties gives strong indications of the suburbs facing above-average rate rises next year, and some may have substantially higher bills.

In the old Auckland City Council area, Grey Lynn is the standout, with selling prices up 24 per cent over CV in average over the past year and up the same figure in the three months to June.

Close behind, and also in line for a jump in rates, are Ponsonby (an average quarterly rise of 20.5 per cent over the year), Westmere (up 17 per cent), Sandringham (16.5 per cent), and One Tree Hill and Freemans Bay (16 per cent).

Other central suburbs such as Royal Oak, Mt Eden, Pt Chevalier, Lynfield, Mt Albert, Three Kings and Epsom may also be facing bigger rates rises than most, with strong double-digit price growth.

At the other end of the scale, Otahuhu (down 3.5 per cent) and Orakei, Onetangi and Panmure (all flat), and Oneroa and Hillsborough (both up 1 per cent) are unlikely to be too upset by next year's rate demand.

The big risers in Manukau, where performance can be compared with Auckland because existing CVs there were set around the same time, are Mellons Bay (up 16 per cent) and Northpark (up 13 per cent).

Otara homeowners may not be happy with a 6 per cent price drop, but the upside will be a less onerous rates bill.

In Waitakere, average prices for the past four quarters are uniformly flat or in decline and look to be well below much of old Auckland.

But CVs there were set nearly four years ago, just as the boom was stalling, so it's difficult to know how that sits in comparison. An educated guess would be quite a bit down.

Set against the inner-Auckland suburbs, most of the North Shore is looking ordinary, with 28 areas up from 1 per cent to 7 per cent and four in decline.

Further north, Rodney has struggled but it is weighed down by September 2007 CVs and things may look worse than they are.

But Wellsford looks set for rates relief ... and Omaha has its nose above the sea of red.