Wellington homeowners can expect to see a significant jump in the value of their homes, after a "dizzying turn" in the market over the past three years.
Rateable values (RVs) are used as a rough "shorthand" for what properties might sell for and provides data that informs how councils set their rates.
Wellington's RVs are set to be updated next week for the first time since 2018.
OneRoof editor Owen Vaughan said there had been a huge shift in the Wellington market in the past three years, but even going back to eight years ago.
"In 2014 just about half of the city's core housing stock had a property value of less than $500,000 – now that number is four per cent," Vaughan said.
"Rapid changes in the market and rapid value growth has seen the bottom end of the market – the bottom rung – pulled further and further up."
"What you'll likely see in terms of the rated valuation is something similar."
He said the updated RVs would be happy news for Wellington homeowners, but might come as a shock for others.
"I think homeowners should rejoice at the fact that they've seen a significant amount of gain in their properties ... but for first-home buyers, they'll see the numbers and see the way the winds are blowing.
"Wellington house prices have lifted quite a lot and they know that buying a house in Wellington for less than a million dollars is becoming increasingly hard."
Vaughan said there had been a particularly "dizzying turn" in the Wellington property market over the past year. Some of it was due to the post-Covid "surge" following last year's lockdown, but there was also a factor of Wellington's market simply catching up.
"Wellington has now caught up with Auckland, and it's got an average property value of just around $1.25 million, and a lot of that has happened over the last year," he said.
"In the 12 months to now the average property value has risen by more than 27 per cent and that's a gain over $260,000 on the average property value."
"And if you think a year ago Wellington's average property value sat just below a million dollars, now we know that the majority of the suburbs in the city have an average property value of more than a million."
A council spokesperson said property valuations had to be done so council had meaningful data to help them calculate how their spending budgets could be fairly paid for by ratepayers.
Rates would not increase substantially where a property's increase in RV was similar to the average across the city, the spokesperson said.
But if a property sees an increase significantly higher than the average increase across the city, more of the rates budget would be assigned to that property.
Lowe and Co managing director Craig Lowe said they expected to see a "psychological shift" in the Wellington housing market as people got used to new RVs.
"RVs are probably slated to rise by about 50 per cent, potentially anyway, based on the kind of gains we've had over the past three years," he said.
"Right now the RV is so far below that people are used to that now. And then when it rises there's sort of a lag in the way that people look at the rateable value."
Although it was counterintuitive, he said an increase in RV could actually be bad news for homeowners in the short term.
"Buyers can actually be put off by a very high RV and it can actually make properties harder to sell," he said.
"If you're a seller your gut instinct is 'oh fantastic, I've got a higher rateable value, that's good news'."
"But if you actually want to sell it, having something that's a really high number and putting it out there can actually sometimes work against you in terms of getting interest in it."
He did not expect the updated RVs to change the number of listings, especially as the Wellington market was beginning to "soften".
Vaughan said the capital's housing market had slowed since the beginning of the year, which he suspected was leading the trend across the rest of the country.
"Wellington saw, back in the end of April, sitting on three-month growth of roundabout 8.5 per cent – that has slid down to about 3.5 per cent, so that's quite a slowdown in the market."
"Wellington started off the year really hot and is starting to cool off, and that's going to be the case for certainly the rest of the year and going into 2022."