House values plummet
Interest rates, inflation, rising construction costs being blamed
Residential property values in Tauranga have plummeted since 2021, with five suburbs recording an average drop of more than 11 per cent, new council revaluations show.
The rating valuations — sent to ratepayers from last Wednesday — put the average value of a residential property in Tauranga at $1.008 million.
This represented an 8.3 per cent — or $83,664 — decrease on average. All suburbs decreased in value.
Tauranga City Council has attributed the decrease to increasing interest rates, inflationary pressures and rising construction costs, which have “dented” market confidence.
Another reason was that development in Tauranga had slowed since the last revaluation in 2021.
A council newsletter sent to ratepayers said residential properties had experienced an average value decrease of almost 8 per cent between 2021 and 2023, with sales volumes also dropping.
This was in direct contrast with the unprecedented growth seen during the 2021 revaluation, when residential property values were up an average of 50 per cent on 2018.
How much did your suburb drop?
Arataki/royal Palm and Otu¯moetai ¯ each recorded a 12 per cent average decrease in value. Pa¯pa¯moa, the Lakes and Mount Maunganui Bayfair all recorded an 11 per cent decrease.
The smallest drop was Bethlehem at 1.48 per cent.
The newsletter said the revaluations provided a property’s “likely selling price” if it had sold on May 1, 2023.
“However, because the Tauranga property market is continually moving, and house prices have generally eased since the revaluation date, your new valuation may not reflect your property’s value if it sold today.”
The newsletter said revaluations were only used for rating purposes and were not intended to be a property’s market value.
It said revaluations had taken “a bit longer than expected”, partly due to the requirement for the Valuer General at Land Information New Zealand to certify new values for the 23 councils across New Zealand with a 2023 revaluation date.
How will revaluations affect rates?
Tauranga City Council rating policy and revenue manager Jim Taylor was asked why there had been less of a drop in value in Bethlehem compared to Mount Maunganui.
“The simple answer would be that properties in Bethlehem sold for nearer their 2021 capital values than those in Mount Maunganui,” Taylor said. “The market in Mount Maunganui was particularly strong in previous revaluations.”
The council newsletter said in general, properties with a valuation
increase or a decrease that is less than the average (about -8 per cent) would pay relatively higher rates from July 1.
For example, Taylor said a Mount Maunganui property with a new valuation of $1,140,000 would have an estimated 5.3 per cent rates increase from $3920 to $4024.
A Bethlehem property with a new valuation of $1,075,000 would have an estimated 13.3 per cent rates increase from $3493 to $3869, Taylor said.
Taylor said a full rates estimator would be live on the council’s website within the next 10 days. People could object to their revaluation if they believed it was inaccurate.
revaluations do not affect house values
Ray White Pa¯pa¯moa director Greg Purcell said every time revaluations came out, they created a “barbecue conversation” where people talked about how it affected values.
“The reality is, it’s not created to affect values. It’s created to affect a rating assessment,” Purcell said.
“The bottom line is, there’s only one value that matters . . . and that’s what a purchaser will pay.”
Purcell said purchasers would like to know the capital value “as a matter of course”.
“Does it outright affect values? Not in my opinion. It’s just another stat in the level of stats.”
Tremains Bay of Plenty managing director Anton Jones said Bethlehem was an “established” and “appealing” area, with such areas tending to “hold their values a little bit more”.
“Whereas somewhere like Pa¯pa¯moa and somewhere there’s a lot of new builds . . . that can have bigger fluctuations.”
Jones said the demand for homes was not as strong as it had been about four years ago and people were prepared to “shop around” due to more stock being on the market.
Asked what impact the revaluations could have on the market, Jones said it depended on who used them.
“I suspect a lot of the buyers will look at them a bit more closely because that benefits them but the sellers won’t necessarily take that into account because they probably think it’s worth more than that.”
Heath Young, Bayleys and EVES Realty Waikato/bay of Plenty/taranaki chief executive said council valuations were only one factor a vendor or purchaser used to determine value.
“Given that the time stamp for these valuations is 1 May 2023, means the values are already out of date and recent transactional sales evidence is
more likely to have a much greater bearing on the current housing market,” Young said.
“In essence, the housing market has already ‘priced in’ these capital value changes so is not likely to significantly impact on the current housing market.”
Young said Bethlehem’s “minimal decline” compared to Mount Maunganui and Pa¯pa¯moa could be because of its location appeal, diverse housing stock, supply and demand dynamics, and broader economic context.
“This could also indicate that Bethlehem has had a higher proportion of newer dwellings built in the past three years where more of the value is attributed to the dwelling value versus land value.”
how are revaluations calculated?
Taylor said the council contracted independent specialist valuation service provider Opteon to conduct the revaluations.
Opteon used a “mass market approach” by analysing the sales in each area — particularly in the months leading up to May 1 — and applying the findings to the other properties that have not sold on the market.
Taylor said values were extensively audited by the office of the Valuer General at Land Information New Zealand (Linz).
Linz used statistical analysis tools to examine sales from the last revaluation date and reviewed the methodology and application of valuations used by Opteon, before providing certification to the council to use the new values for rating purposes.
Does it outright affect values? Not in my opinion. It’s just another stat in the level of stats.
Ray White Pa¯pa¯moa director Greg Purcell