Thousands of Auckland homeowners are fighting their newly calculated CVs - though most objectors want their property’s value reduced so they’ll pay less in rates. Lane Nichols reports.
A Weymouth property owner whose house was rendered "uninhabitable" by chemical contamination has had the official council valuation halved after lodging an objection - knocking more than $300,000 from its CV.
But the homeowner who reclad a leaky Beachlands house has seen its value soar by 133 per cent after challenging the council estimate - adding $730,000 to its capital value.
The cases are revealed in council documents provided to the Weekend Herald. They shed light on the controversial revaluations process, which has seen the value of Auckland residential properties surge by an average 34 per cent since 2011.
A team of Auckland Council and Quotable Value staff are working their way through 10,000 objections lodged by property owners since the three-yearly revaluations were released in November.
The vast majority - about 8350 - are from residential property owners concerned their posted CVs did not accurately reflect their biggest asset's actual worth.
But in a dramatic turnaround from 2011, about two-thirds of those who lodged objections late last year say the council overvalued their properties and they want a decrease.
Presumably for most, this is to escape the threat of soaring rates increases which are intimately linked to a property's rateable value.
But amid Auckland's red-hot property market, thousands of others say their homes were under-valued and have sought a recalculation amid fears the market value of their properties could be eroded by a lowly CV.
Mass appraisal of hundreds of thousands of Auckland properties - many sight unseen and based on "desktop" estimates - is not an exact science.
Improvements like renovation work, expensive high-end materials or breathtaking views may not be recorded during a standard revaluation without an actual physical inspection taking place.
Likewise, chemical contamination from a former P-lab or leaky building damage can pull a property's official valuation down - assuming the valuer is aware of the problems.
Experts raised concerns about the revaluation process in November when it emerged many of the new estimates were already well below the actual selling prices of Auckland homes.
It sparked calls for the process to be revamped or scrapped, with some homeowners forking out for independent registered valuations rather than relying on council-issued CV figures when selling their homes.
Real Estate Institute figures for March show the median sales price across Auckland was 18.1 per cent above July 2014 valuations - much higher than the 6.4 per cent above CV elsewhere in New Zealand.
The council is now at the halfway point of analysing scores of objections received before the December 23 deadline.
Of the 4271 objections assessed so far, 1271 resulted in a valuation decrease, 1483 saw an increase, and 1517 saw no change to their CV.
Jo Holmes.
Overall the average change is a 4.33 per cent fall - more than $30,000 off the value of a median-priced Auckland home.
The average value increased after the objections process three years ago.
Some of the 2014 objections have resulted in only minor changes, but others were dramatically out.
The biggest movement saw $1.6 million added to a Remuera property's $6.4 million CV - a 25 per cent jump. The council blamed "data/valuation adjustments to both land and improvements" for the massive discrepancy.
At least four others - in Remuera, Albany and two in Castor Bay - saw recalculated increases of more than $1 million each.
Conversely, three properties in St Heliers, Mt Eden and Manly all saw their values slide by $850,000 following objections, one for "adjustments to land value reflecting future development restrictions". The St Heliers property is a mansion originally valued at $8.1 million.
In total, the 10 biggest adjustments resulted in valuation changes exceeding $10 million - enough cash to buy about 20 "affordable" Auckland homes.
A Waterview property with a published CV of $730,000 shed nearly $300,000 after it emerged a dwelling assessed in the original valuation had been demolished.
Another property in Manurewa with an $810,000 posted CV lost $445,000 (a 55 per cent drop) after the discovery of "an input error".
Auckland Council principal valuer Peter McKay defended the revaluations process as "sound and robust". The great majority of council valuations were about right. The rate of objections had fallen in 2014 to just 1.8 per cent of the total number of assessed properties.
However he admitted mistakes did occur.
"We're looking to get better each time. We go through an audit process and we think we're improving. But with a mass appraisal valuation process there'll always be one or two that are wrong."
Miscalculations of a million dollars or more were "not as good as we'd like". But such mistakes usually signalled information gaps about a property such as improvements to the internal condition that could not be picked up without a physical inspection.
McKay stressed that the revaluations were for rating purposes, not a market value of people's homes.
"Traditionally the rating valuations correctly or incorrectly have been seen as a marketing tool or something people use for other purposes as a measure of asset worth.
"There are people out there who think it assists the marketing process to have a high CV. That's debatable."
Real Estate Authority chief executive Colleen Milne said CVs were, at best, "a guide" for buyers as to a property's price, but it would be dangerous to rely on them as an accurate measure of market value.
"Sometimes it may give you an indication about where that price may be sitting," she said. "But obviously at the moment it's very difficult to measure by the CV, particularly in central Auckland or North Shore, where prices are rapidly increasing. We're looking at 20 per cent in the past 18 months. It puts those CVs out of date."
Agents used a "competitive market analysis" based on the recent sale of similar properties in the area to provide a price estimate to vendors, which was the most accurate measure of value.
The jump in Auckland homeowners requesting a devaluation of their property was a rates issue, Milne said.
$850,000 taken off three properties in St Heliers, Mt Eden and Manly
How does my CV affect my rates?
Council rating valuations are one component in determining what portion of the region's total rates you will pay. However, the revaluation has no impact on the total amount of rates the council collects.
The total rates revenue is set each year through the annual planning process, then apportioned across ratepayers using a combination of factors, including the value of your property.
Rates are made up of a uniform annual general charge (a fixed rate applied to every rateable property), and a general rate based on your property's capital value.
Soaring rates shock pensioners
George Mihaljevic was surprised by the increase in his home's value but decided not to object. Photo / Jason Oxenham
Waiheke pensioner Jo Holmes has successfully challenged her council revaluation, knocking $200,000 off her CV.
The 65-year-old's Ostend house jumped in value from $750,000 to $1.15 million in last year's Auckland Council revaluations — a 53 per cent increase.
"It was a huge amount, way in excess of the average for the island."
Worried about the effect of the high CV on her rates bill, Holmes objected on the grounds her property was near a telecommunications tower, which she believed should reduce its value. The council agreed to revise her CV down to $950,000. "I accepted that house prices had risen, but I reckon [$950,000] was a reasonable amount. Despite what the council says, those values do have an effect on your rates."
Holmes already pays about $3000 a year in rates, which she says have risen by about 50 per cent over the last four years. Like many other residents on a fixed income, her rates bill was eating into her disposable income. She is also the spokeswoman for Auckland Ratepayers' Alliance. She said the number of people wanting their valuation reduced suggested widespread concern about the growing rates burden, although she accepted property valuations were only one factor used by the council in setting rates.
"My concern is that revaluations are just done piecemeal across the whole city. They don't even look at the properties [in many instances] and some of them are outrageously way above the anticipated prices rises in certain areas.
"I think you'll find the large number [of objections] reflects the lack of accuracy." George Mihaljevic bought his Ponsonby home in 1951 for £2000 ($4000). But he was stunned to learn it was now worth more than $2.1 million when he received his revaluation notice in November.
The 84-year-old already pays about $5000 a year in rates and fears it will rise to $6000 on the back of the "ridiculous" rateable value of his Vermont St property.
He has no intention of selling to cash in on his paper-based wealth.
"It doesn't matter if people offer me $4 million. What am I going to do with it at my age?"
Mihaljevic still fixes radiators from his home and has several vintage cars parked in a shed. He considered lodging an valuation objection but decided not to rock the boat.
