Rel­e­vance of cap­i­tal val­u­a­tion de­bated

Otago Daily Times - - WEEKEND BUSINESS & MONEY - SI­MON HART­LEY

THE use of cap­i­tal value (CV) as a mea­sure­ment of what homes may be worth is a grey area for both sell­ers and buy­ers and most real es­tate agents see lit­tle rel­e­vance in CV data.

Even Quotable Value (QV), which is con­tracted to un­der­take three­yearly val­u­a­tions for 85%­90% of coun­cils na­tion­wide, said CVs were quickly out­dated and a reg­is­tered val­u­a­tion was the best value in­di­ca­tor.

With es­ca­lat­ing house prices in Dunedin and Cen­tral Otago, the rel­e­vance of us­ing CV as a guide­line is hotly de­bated — es­pe­cially when some house prices have dou­bled since the last CV was done in 2016.

Quotable Value’s set­ting of cap­i­tal val­ues gives a com­bined build­ing, land and im­prove­ment value.

In Dunedin re­cently, some coun­cil CVs have been eclipsed by prices paid, by as much as $100,000.

Quotable Value gen­eral man­ager David Nagel was con­tacted and asked about CVs rel­e­vance and pur­pose.

He said the in­tended pur­pose of the CV was to be used by lo­cal au­thor­i­ties to levy rates.

‘‘The CV is a snapshot of the likely sell­ing price at the date of val­u­a­tion, ex­clud­ing chat­tels.

‘‘How­ever they [CVs] date quickly, par­tic­u­larly in a mov­ing mar­ket, and have less rel­e­vance to the po­ten­tial sell­ing price of a prop­erty the fur­ther time passes from the date of val­u­a­tion,’’ he said.

That ad­vice ap­plied equally to both sell­ers and buy­ers.

Cut­lers owner John Cut­ler be­lieved CVs only gave a ‘‘rough guide­line’’, given the time­frame in which they were re­viewed.

‘‘CVs serve their pur­pose, as a rat­ing mech­a­nism,’’ he said.

Metro Realty man­ag­ing partner Mark Stevens agreed prices well above CV were be­ing achieved and coun­selled sell­ers not to use the coun­cil’s CV for as­sess­ing house val­ues.

He had seen in­stances of re­tiree sell­ers ex­pect­ing $300,000, based on their CV, whose prop­er­ties went on to sell for $500,000.

QV se­nior con­sul­tant Paul McCorry said a val­u­a­tion re­port by a reg­is­tered val­uer pro­vided ‘‘the most ro­bust in­di­ca­tion’’ of a prop­erty’s value.

‘‘It’s cur­rent to the mar­ket con­di­tions and is in­clu­sive of chat­tels such as car­pets, cur­tains etc.

‘‘It is a use­ful in­di­ca­tor of a re­al­is­tic price that could be achieved for the ven­dor, and of­ten it is re­quired by the pur­chaser for mort­gage lend­ing pur­poses,’’he said.

CVs are partly com­puter mod­elled and done with­out a val­uer en­ter­ing the prop­erty or house.

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