Rotorua homeowners may be in for a pleasant surprise when they receive notification of their home's new capital value. But there could be a downside to the city's soaring property values.

Every three years the district, that is the capital value and the land value, is revalued for rating purposes.

Starting today, Rotorua homeowners will receive rates notices in the post informing them of the new capital value of their home. The letters will not indicate a change to their rates.

Three years ago the average Rotorua property value was $260,000. It is now $370,800 - up 48.6 per cent.

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Capital values in Rotorua have increased more than $3 billion during the past three years with residential values up a whopping 45 per cent in the same period.

However, the downside could mean a significant rates hike for many Rotorua residents.

In a nutshell, if your revaluation is higher than the average capital value for your suburb, an increase is likely, but if it is lower your rates could decrease.

A report prepared by valuation firm Opteon and presented to the Rotorua Lakes Council at this week's Operations and Monitoring Committee meeting by the council's business support group manager and chief financial officer, Thomas Colle, showed Selwyn Heights, Fordlands, Koutu, Ohinemutu and Western Heights all had average capital values increases of between 60 and 70 per cent.

"The residential capital value increases shouldn't come as any surprise considering the buoyant market since 2015," Mr Colle said.

"But what stands out is the suburbs at the lower-end value previously have had the most increases while some areas with higher capital values like Kawaha Point and Lynmore didn't have much of an increase. So basically the top end hasn't moved much while the lower end has moved significantly."

Councillor Charles Sturt said it was important people kept in mind the revaluation was solely a mechanism for the council to set rates and the capital value was not necessarily what a house would sell for.

"I do think the huge swing to an increase in residential valuations means we [council] are going to be impacting on people's ability to pay rates," Mr Sturt said.

"Most of the huge increases are in the lower-socio economic areas and we need to have a look at the complete picture of the impact this will have. I want to see the direct impact on ratepayers."

Mr Colle said the council was aware of what might happen and was working toward understanding it. "It will form part of our discussion in the Long Term Plan discussions."

Potaua Biasiny-Tule, from Te Tatou o Te Arawa, said he was receiving complaints about rental properties.

"As the house prices go up, so do rents, and the pohara [poor] families can't afford to live. Those who own houses, and [are] only just making it through, will be rated out of their homes.

"I am worried we will start to see families leave because our city is so successful. I want to make sure that with all our growth, we are still looking after families that have been here a long time."

Councillor Tania Tapsell said looking at the report was heartbreaking.

"As a young person trying to save for a house, this pushes me out another five to 10 years. It raises a very serious question about housing affordability in Rotorua."

On the flip side, councillor Merepeka Raukawa-Tait said she was pleased people in Koutu, Western Heights and Fordlands now had equity in their homes.

"This cannot be overlooked or underestimated," she said.

The council has set up a rating valuation tool allowing property owners to see values of their suburb, street and property online. Go to Rating Valuations 2017 under Properties and Rates on the council website.

Homeowners also have 30 days to object to their valuation. Mayor Steve Chadwick, at the meeting, encouraged people to appeal their valuation if they didn't agree with it.

At the last revaluation about 1000 objections were received and about the same number in 2011. Information on how to make an objection is on the back of the Notice of Valuation.

City attractive to investors

Bayleys chief executive Simon Anderson and Professionals principal Steve Lovegrove say because Rotorua has become an attractive proposition for investors during the past two to three years, supply and demand in suburbs like Koutu, Fordlands and Selwyn Heights has pushed prices up.

"The increase reflects what we have been seeing every day," Mr Anderson said. "There has been significant growth and this has come largely on the back of some great initiatives from Rotorua Lakes Council and the business community.

"There is a good economy in Rotorua and the increase has to be seen as a positive. There are more opportunities for employment that weren't there before which should also help ratepayers."

Mr Lovegrove said the new rateable values had already started to interfere with buying and selling.

"Sellers want to know what their property is worth and buyers want to know what to pay," he said. "While the rateable value is not a registered valuation, it does draw a line across properties. At any given time you can expect properties to be selling X amount above or below the rateable value.

"In the past three years we have seen some dramatic price increases in the lower socio-economic areas as they have become highly desirable for investors."