Valuations get hammered

Photo / NZ Herald

Auckland Council's revised property valuations are supposed to represent probable market value. The Weekend Herald put them to the test at a busy auction day. Phil Taylor reports

It seems owners held off selling until after the Rugby World Cup. That, and the springtime bump, have Barfoot and Thompson's auction rooms buzzing.

It is Wednesday, and five auctioneers take turns chomping through 74 properties. Sixty-four per cent sell. It takes most of the day so February must be a frenzy.

As many as 100 can go under the hammer in a day in real estate's busiest month, auction manager Tim Carter tells the throng that ebbs and flows through the day from 20 to 100 people.

Carter is friendly, his patter smooth, his dress immaculate. Presentation is the first rule of sales and that doesn't just apply to the merchandise.

Buyers wear what they like, it's their money that talks. Today some wear business attire, others dress casual. An older man is in shorts.

The fun begins almost immediately and during what should be the sombre part, the mortgagee auctions. Agents take instructions from vendor-bankers on the phone who make cool decisions on the numbers, unencumbered by emotion.

But come Lot 5 and a discernible giddiness leaks through the room. Three bidders battle for a one-bedroom apartment with covered balcony, near Myers Park in the city. At $52,000 the bank says it's on the market and at $60,000 the pretty Asian woman in the "Julius the Monkey" T-shirt is the new owner. Nerves give way to relief, exhilaration maybe. The man in the hoodie hugs her. It will turn out to be the low price of the auction.

The buyer later introduces herself as "Tina". She is effervescent. It's her and her partner's first auction and first investment property. They own their home in Henderson Heights and she is on maternity leave from her accounts job.

In contrast a once-high-flying-but-now-bankrupt developer sits at the front raising his hand to up the ante during another mortgagee lot two partly built Parnell townhouses. David Henderson knows the ropes. He goes about the task perfunctorily, reaches the point his party won't go beyond and the hammer falls in favour of another bidder at $2.45 million.

There are several small offices at the rear of the room where agents take instructions from vendors as bidding progresses.

A wallchart depicts the property clock: 12 o'clock, boom; 3 o'clock, corporate failures and falling commodity prices; 6 o'clock, falling real estate values.

In the foyer is a framed quote from Maurice Thompson, a company founder. "The longer I live the more certain I am that enthusiasm is the little recognised secret of success." It recharges mind and body and, says Thompson, "is the enemy of pessimism for which there is no room in a real estate agency".

Some properties are passed in, a handful don't attract a bid but mostly sales are buoyant. Many people do their own bidding, often chasing a home of their dreams.

Eager contests pump prices and the fall of the hammer produces winner and loser, elation and deflation.

A character three-bedroom Grey Lynn villa comes down to a battle between two determined bidders. The winner is a pregnant women with a baby in tow. Tears, embraces, then off to complete the paperwork.

At $1.038 million, the villa fetched 25 per cent more than the council's new valuation of $830,000 (itself way up from $680,000 previously).

One agent thinks the claim that the new valuations are "probable market value" absurd. "It's all over the place," she tells the Weekend Herald. Another estimates a third are about right and a third each are above and below, sometimes significantly.

The valuations are a distraction, that agent says, and may cause the internet-savvy (who check valuations online and decide not to bid) to miss out.

But optimism is the flavour of this day. The Grey Lynn villa reflects the trend the average (disregarding mortgagee sales) is 24 per cent above the council's valuation.

It could have been higher. Some auctions leave you scratching your head, such as the Sandringham three-bedroom brick and tile cross-lease where the vendors turned down an offer 41 per cent above the council's valuation of $325,000. Or the three-bedroom with the modern kitchen and double garage in Blockhouse Bay, passed in despite an offer 45 per cent above the valuation of $330,000. Do the owners know something the council doesn't?

The biggest "over" among the day's sales is a picture-perfect four-bedroom Croydon Rd, Mt Eden villa that fetched $1.285 million 34 per cent above the new valuation of $960,000 (up from $880,000).

Something's happening. A luxury apartment sold for 45 per cent above valuation at a Bayleys auction this month, fetching $1.42 million, and a Remuera house topped that, selling at 51 per cent above valuation for $2.85 million.

At the beginning of the month Quotable Value reported Auckland was back nudging record boom-time prices.

Overheated? One agent risks contravening the Code of Enthusiasm with a word of caution. Are buyers not watching what is happening in Europe? Property is flat in Australia and our interest rates are hardly likely to drop further. A mini-boom that may bust, she wonders.

Could it be that it is 35 minutes past the hour on the property clock "Hesitant uneven recovery"?

Auckland Council's valuation team leader Peter McKay isn't surprised by the trend of prices outstripping valuations. The valuations aimed to reflect the market on July 1 and it has continued to rise steadily, particularly in inner-city suburbs.

With 40 valuers assessing Auckland's 516,000 properties it is impossible to visit them. Instead relevant sales are scanned to pick trends and consent files examined for improvements.

So far 4000 objections have been lodged and come from both those whose valuations have risen and fallen. Big increases mean higher rates but could help those planning to sell, the opposite applies for decreases.

Some whose valuation dropped markedly have run into money problems as banks demand more collateral, such as Hein Erasmus, owner of a leaky Gulf Harbour property. He borrowed about 80 per cent of the previous valuation of $345,000. "The problem now," he said this month, "is the valuation has dropped 67 per cent to $121,000 because it is a leaky complex. We owe the bank 247 per cent of the value."

McKay says it is unusual for properties to decrease. Most common reason are weathertightness issues, land changes (such as subsidence) and the impact of the global financial crisis.

In the auction room there is an outburst of enthusiasm. C'mon, the auctioneer cajoles a hesitating bidder, "it's only money". "Is that your Mother? Don't listen to her, mothers always say 'no'."

Back at the office a check of the council valuation for Tina's apartment reveals it is $160,000.

She has bought at 62 per cent below valuation the biggest discount of the day.

Tina could just be laughing all the way to the bank.

- Additional reporting: Anne Gibson

Revaluing the Super City
* Biggest revaluation with 516,000 properties assessed by 40 valuers from Auckland Council and Quotable Value.
* Aimed to bring valuations by the former councils under one umbrella and timeframe and to set rates.
* Aimed to reflect "probable market value" as at July 1 but not intended for marketing or mortgages.
* Properties assessed by examining relevant sales and registered improvements.
* Normally properties increase in value but this time some fell, the main reasons being weathertightness (those with a history of leaks and those built of materials associated with leaks), land changes (such as subsidence) and the impact of the global financial crisis.
* Owners have until December 16 to object to their valuation.