Residential, Lifestyle, Commercial and Industrial Property Valuers servicing the Hutt Valley

Rating Valuations

Late 2013 saw the release of the tri-annual Rating Valuations for both Upper Hutt and Lower Hutt cities. The release of “new” Rating Valuations can often cause a good deal of consternation to home owners; and as Valuers working intensively within the Hutt Valley market, we often field numerous calls from concerned parties (and are happy to discuss the issues, in an attempt to put minds at rest).

As a Valuer, who  “in an earlier working life” was employed to produce Rating Valuations; I feel, “it would be preferable if such figures were accurate on the day they were released; however I know the difficulties of achieving this, and I am sure that even if accuracy were achieved, there would still be those of us who would disagree with the figures”.  To be fair to those who produce the Rating Valuation figures, when you think about the logistics of producing the Rating Valuation (ie. “an attempt to accurately assess the value the entire city’s land and buildings as at a single date, in a market which is often prone to value  fluctuations”) it is perhaps “an idealistic dream”;  and RVs are not necessarily reflective of the actual value of an individual property on the day.  The biggest problem in public understanding that I come across is that, despite the fact that RVs are only  produced every three years, some look at them as a “base from which they try to assess the Current Market Value” (often at times a year or two down the track).  Any attempt to “adjust” the Rating Valuation to equate to a true  Market Value figure is fraught with difficulties (often akin to flipping a dice to assess value).  Between the “three yearly” Revision Dates, if physical changes occur to properties (such as additions, or new builds) revised Rating Value figures can be issued; in such situations, I will often have it quoted to me that someone has just obtained a “current value of the property”; what is not understood is that, legislation requires that the “figure issued” is “back dated” to the effective “base date” of the Revision (currently late 2013 within the Hutt Valley); this is so that rates charged for different properties will be based upon the same Revision Date as that for all other property within the area; this figure is then unchanged until the completion of the three year revision cycle (regardless of what might be happening to values within the local market in the interim).

So, an understanding of the purpose of the “Rating Valuation” (previously referred to as the “Government Valuation”)  is critical to understanding the limitations of the Rating Valuation figures themselves (i.e. effectively the only purpose of the RVs is “to value every property within the City as at the one effective date, so that these figures can be used as the basis for apportioning Local Authority Rates charges”). Whilst accuracy of the “individual” Rates Values would be nice, in reality individual accuracy doesn’t much matter; as a Valuer, my main concern is not the accuracy of the individual figures themselves, but that the “relativity of values between different properties, is fair and consistent”.  Relativity is important, as it means a fair base for the Rating charges levied against different property.  Despite many people’s worries that “increased Rating Values, will equate to increased rates” (and others hopes that a “drop” in the Rating Value will see a similar drop in the Rates themselves), this is not necessarily the case; as the Local Authority will assess “what income it requires to run the city”, and then apportion this out to its various income sources.  Rates today are generally “adjusted” to treat different property groups differently (ie. commercial vs residential property) and rates charges are often based to a large part on “lump sum figures, irrespective of actual property value”, whilst part of the rates charge will also be levied on a “cents in the dollar, based upon the property value” basis (this is where the RV comes into play).

Is the Rating Valuation an accurate reflection of the actual property value?

As indicated above, not necessarily – given that “the figure is limited to a triennial revision date, even if it were accurate on the day it was released, with values possibly changing over time, the current value of the property could be somewhat different to the RV figure”.  Added to the likelihood that the RV and the Current Value might differ, is the fact that, the majority of properties will not have been re-inspected for each Revision (so the state of the property “on paper” could vary from that “in reality”).  The lack of inspections of every property for , can “over time” result in the pattern of the Rating assessments  becoming somewhat “erratic”; however generally within the limitations of the “mass appraisal approach”, many figures whilst not accurate remain within acceptable margins (ie the “ballpark”) to utilised for Rating purposes only.  Whilst some parties within the market will attempt to calculate the Current Market Value by using a “percentage adjustment based upon the Rating Valuation” (these parties often using Computerised models to give the appearance of updated accuracy); the use of any “hands-off” method of valuation that doesn’t involve a real person re-inspecting the property, is fraught with the danger of inaccuracy (ie. despite the advances in computerisation, the only proven method of accurately assessing a property’s current value, is a full inspection and the valuation of the individual property).

Historical trivia, relating to Taxing or Rating of citizens and their property, by the Governments of the time:

A number of years ago UK residents reacted strongly against the proposed introduction of the “Poll Tax” (a rating system based upon the number of people living in the house, as opposed to the value of property); however the charging of taxes (or rates by another name) has come in different forms over the centuries.

Historically the basis for taxes (or rates) have included such approaches as :

  • Tax based upon the number of toilets in the house – this tax caused people to “block up” toilets  (so to speak) to avoid the tax.
  • Tax based upon the number of windows facing the street – similarly, the enterprising citizens boarded over windows to avoid the tax (see photo above)
  • and, taxes have also been levied upon such things as “stoves”, “cooking oil”, “inheritances”,” sugar” and “tea” (with the latter resulting in America’s “Boston Tea Party”, and their war of independence).

So perhaps “Property Value as a basis for Rating” is beneficial, as it tends to avoid wars, and allows our houses to retain good natural lighting, and working toilets.

Lindsay Webb Valuations are Registered Public Valuers.

 Servicing the Hutt Valley cities of:

                                  Upper Hutt  and  Lower Hutt

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