Within the next few weeks property owners will be receiving their new rateable valuations in the mail. It’s an exercise carried out by Quotable Value (QV) that happens in the Whangarei district every three years, solely for the purposes of establishing how much you pay in rates, relative to other property owners in the district.
Relative is the key word because it’s the local politicians that set the total amount of rates collected, but it’s the valuation that determines how much of that burden falls upon each individual property owner. Here’s a simple example to explain.
Let’s assume there are only two properties in the entire district. One has a rateable value of $200,000, and the other a value of $1.8m. If the local council decides it needs $20,000 to fund the council’s activities, it would rate the first property $2,000 and the second $18,000.
Let’s assume that after the September 2015 revaluation the new values of the same two properties are $300,000 and $1.5m respectively (an increase for the low value property and a decrease for the other). Using the new valuations the annual rates would be collected by rating the first property owner $3,333 (a $1,333 increase) and rate the second $16,667 (a $1,333 decrease). The total rate take remains the same, but the burden has shifted from one property owner to another because their relative values have changed.
The valuation notice breaks a property’s value into land value (LV) and improvements value, which together total the Capital Value (CV). In the Whangarei District, the council use LV to calculate general rates. Most councils, including the Northland Regional Council, use capital value (which should approximate the current market value of the property if sold on the open market) because they believe it better reflects the property owner’s ability to pay.
If your land value has increased by more than the land-type average then your general rates will increase because you will be paying a greater share of the rate take, and if the council has also decided to increase rates (which both the WDC and the NRC have) then you will get a double whammy increase. If your land value has fallen by less than the average then someone else will pay part of your rates, but you will still get hit with the councils’ rate increases so you may be better or worse off or unchanged.
It needs to be clarified that the valuations relate to general rates only. On top are user charges, which include a uniform annual charge on all properties and other uniform charges depending on the services received.
The new rates will take effect from 1 July next year and will not be known until the councils set their 2017 annual budgets in the second quarter of next year.
In arriving at the value, QV takes what is called a ‘desk-top’ approach. They don’t visit each property but compare recent sale prices against the previous rateable value of those properties to produce an average percentage change that is then applied generally across a suburb or defined area. It’s very much an “average” approach and usually takes no account of any unique aspects, nor the condition of the improvements.
Given it is an approximate valuation, I encourage everyone to compare their new and previous valuations. If the land value component is higher than you think is reasonable, then come 1 July next year you will be paying more than your fair share of the rate take.
Property owners have a right to object to their valuation but there is a time limit on doing so. Details of the objection process will be provided with your new valuation notice. Lodging an objection costs nothing and it will at least provide you with an opportunity to express your concerns to the nice people at QV.