Monday, October 12, 2015

Frank Newman: Rateable valuations

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.


Rick said...

I have a property in the Hokianga. My little slice of heaven. Over the last decade I have seen my property value decrease by 20 %. At the same time the rates take has increased by 110%..yes that's right over doubled. In return all we get is a metal road serviced. No street rubbish collection just a dusty or muddy metal road.
The discussion should be about councils living within there means....just like the rate payer does.
Instead councils are hell bent in finding more invented ways of screwing more money out of the rate payer. ITS GOT TO STOP!!! Councils need to shift there focus to rate reduction not increases.

Anonymous said...

We must get rid of rates. They do not take into account eh ratepayers ability to pay. Local government, while it continues to exist should raise money by commercial activities unrelated to what they were set up to do.

Brian said...

Rates, Councils, and valuations.
Quotable Value! This system of valuing a property from the confines of an office beggars belief. If this way of valuing was in any way credible, why then do Private Valuer’s arrive at one’s property and do the fullest inspection. They also take into account not only the surrounding houses sold, their appearance, condition etc., but also the position and situation of that property.
Quite frankly Q V assessment is a cosmetic fraud, a means of saving the government monies, and has no “value” in a real sense of the worth of any property It is as Frank states, just a means of helping Councils in gaining the expected increase in rates.
Local Government is virtually out of control in New Zealand, it is the proverbial cash cow for organisations bent on bureaucratic increases to justify their very existence. The only way to judge these bureaucracies is to compare them to the structure of past Councils whose activities built up this country.
Yes comparisons as they say are odious, but take a look at the costs involved and staff employed even 50 years ago. What have we now?, a vast army of officials, mostly with cars supplied, duplicating services and the only remedy to the ever increasing burden of rates is to justify this burden upon us all.
There needs to be a complete re-assessment of the structure of our Local Government, and a return to core services. The removal, and selling off of those parts of Councils which can be run far more successfully as a private concerns.
Oh Boy! those Chardonnay socialists might violently disagree, but then when did any socialist ever worry over costs, especially in God’s Own!
I once heard an MP saying that “The Financial affairs of both Central and Local Government are far too important to be left in the hands of those who depend upon elections to retain their positions.” I think I know what he meant, but is this the price that we have to pay for democratic government? Or is there another avenue?
Frank can you give us your assessment!!!

Anonymous said...

The rating system is behind the massive blow out in Council spending. QV is a farcical organization. Years ago I disputed a valuation which was derived from a 'Drive by Shooting'. QV's agent (she insisted) drove by my house. Next she took a look at land sales in the vicinity and came up with a valuation.
This 'Drive By' system in no way takes into account the state of the interior of the house. For a potential purchaser this is of major concern. Much more important than what other houses in the neighbourhood sold for. How many people buy a property just by looking at the exterior?
The other contentious point which has caused property bubbles to burst in the United States is valuing a place on its sale value. Speculators who deal in selling and buy properties benefit from this. Councils also benefit from this. the important point is that when a regular property owner buys a house, that is what its value is! No matter what QV states is the value, this is not REALIZED' until the property is sold again. Local government and QV need to appreciate this. Most politicians dont understand this. Inflation is fueled by this.
Using a simple example - a house is bought in 1980 for $20,000. This is a couples retirement property. They have no intention of making money off this property. Their dream of security in old age is shattered when QV supports the district council in inflating the value of the property. By 2000 the couple are crippled by a rates demand for 25% of the 1980 value of the property each year!!!!
More realistically we purchased a house in a run down condition. Under a fairer rating system it was rated at the value of the property plus 2%. When this was resold many years later the purchaser pays a much higher rate. This kept council spending in line with the TRUE value of properties. It was based on what property owners had paid NOT what the council wanted.