Home-owners are chasing fool’s gold
Congratulations! You’ve made it. Never mind the Powerball jackpot – if you own a home in the city, you’re made. You’re Donald Trump. You’re Daddy Warbucks. You’re the Monopoly man with his top hat, right?
Twenty-two councils are publishing their triennial rating valuations by Christmas. Among them are Invercargill, Queenstown, Marlborough, Napier, Waikato and, tomorrow, Auckland.
What they show is that values in the most exclusive neighbourhoods have continued to soar over the past three years. In Wakatipu Basin the average rateable value has climbed 50 per cent to $2.3 million. And Auckland’s Herne Bay is knocking on the door of becoming our first $3m suburb.
In 2014, home-owners’ fascination was such that they crashed the Auckland Council and QV.co.nz websites searching their new valuations. Tomorrow, the demand will be even bigger.
Except … it’s not real. They’re mining for fool’s gold. Homeowners will be no richer tomorrow than they are today. And here are five reasons why.
1 City and district councils commission these ratings for one reason, and one reason only – to set rates. And rising rates are one of the great certainties of life.
2 Unlike market values, rateable values include consented renovations, and they do not include chattels. Most importantly, council-contracted valuers don’t inspect every single one of New Zealand’s 1.8 million dwellings – they don’t know whether your home needs a new roof, or if drug dealers have moved in next door.
3 Your home’s value is just on paper. It means nothing unless you borrow against it, or sell it.
4 Even if potential buyers are rash enough to make you an offer based on your home’s rateable value, you’re going to need somewhere else to live. Unless you ship out to Taumarunui or down-size to an apartment, you’re just going to end up spending all your ill-gotten gains on an equally over-priced new home.
5 And here’s the clincher. An Englishman’s house may be his castle, but in New Zealand we live in communities. We can’t hide behind barbed-wire-topped walls of over-valued castles and ignore the homeless at our gates.
A housing crisis that creates a wider moat between haves and have-nots, one generation and the next, will only impoverish us all.
So discard that top hat. Homeowners must accept that values need to drop to let more New Zealanders rent or buy a home.