House price estimates can differ by the hundreds of thousands

One of the first things a potential buyer does when looking at a property is check price estimates online, but depending on the provider, these can vary enormously.

The estimated market price of one Lower Hutt property currently on the market differed $690,000 between the provider with the highest estimate and the one with the lowest.

Each price estimate supplier has its own method of calculation.

The Sunday Star-Times looked at four of the most popular – CoreLogic, Valocity, QV and Homes.co.nz – and put their automated estimates to the test on four properties for sale now from around the country.

QV

QV began as the Government’s valuation department in 1896 to provide estimates for tax purposes – and it still does this, supplying valuations to 88 per cent of councils.

In 2005, QV became a Crownowned company, and now produces estimates of residential properties for free online.

Spokesman Simon Petersen said these estimates were based on a combination of property data and recent sales.

‘‘Our real-time value estimates replicate how a registered valuer would go about assessing the value of the property, using an algorithm and not purely by using inputted property data attributes to calculate the value,’’ he said.

With so many councils (including Auckland, Wellington, and Christchurch) using QV for triennial valuations, Petersen said QV had a lot of data to draw on.

Valocity

Valocity head of valuation James Wilson said the company’s automated valuation models used algorithms that compared a property with a selection of similar, recent similar sales.

‘‘The models select and adjust multiple recent sales based on a range of factors including the floor area and the property type, location, the number of bedrooms, and the date of sale,’’ Wilson said.

Other factors included cladding type, and the age of the property. The models also supplied a confidence level rating, which usually depended on how common or atypical a property was.

Wilson said it was important estimates were based on independent computer models and for that reason the company didn’t use any external parties – including real estate agents or registered valuers – as input into its values.

Homes.co.nz

Popular website Homes.co.nz has been criticised recently for allowing real estate agents to influence its HomesEstimate without telling potential buyers when it had happened.

Homes.co.nz chief data scientist Tom Lintern said about 3 per cent of listings received input from an agent.

Homes.co.nz says its HomesEstimate is calculated from public data, registered valuers’ valuations, and real estate agent current market appraisals.

CoreLogic

CoreLogic NZ country manager Simone Moors said the company estimated the values for about 95 per cent of all residential property every week.

A point of distinction was the company maintained a team in Wellington tasked with data quality and maintenance, she said.

‘‘Both on-the-market prices and sold prices are used in the modelling process to assess the estimated market value of a particular property.

‘‘The attributes selected in the [auto valuation models] relate to the characteristics of properties themselves, for example bedrooms and bathrooms, and the location of the property, for example zoning, land use, street types, latitude and longitude.’’

The model was designed to select the factors that best predicted the market value of a property.

CoreLogic also maintains a confidence rating.

Comparing estimated market values

❚ A five-bedroom, two-bathroom, 171sqm property located in Korokoro, Lower Hutt, shows just how estimates can vary.– Homes.co.nz: $1.73 million (this estimate had stood at $1.24m before an agent’s appraisal increased the HomesEstimate) QV: $1.04m

CoreLogic: $1.13m (with a medium to high confidence level) Valocity: $1.12m (medium-high confidence)

❚ A four-bedroom, one-bathroom villa in the Auckland suburb of Sandringham.– Homes.co.nz: $2.92m (this estimate had been $2.69m before an agent’s current market appraisal increased the HomesEstimate)

QV: $2.88m

CoreLogic: $2.72m (low confidence)

Valocity: 2.72m (medium confidence)

❚ A two-bedroom, one-bathroom brick bungalow in Redwoodtown in Marlborough.– Homes.co.nz: $460,000 (this estimate had been $537,000 before being reduced by an agent’s appraisal)

QV: $485,000

CoreLogic: $510,000 (with a medium to high confidence) Valocity: $490,000 (high confidence)

❚ A one-bedroom, one-bathroom, 40sqm property in Kaitaia on 1.58 hectares.–

Homes.co.nz: $475,000 (had been $260,000 before an agent’s current market appraisal increased the HomesEstimate) QV: No estimate available (as the property was classed as a lifestyle property, not residential) CoreLogic: No estimate available due to lack of information on the property or similar properties in the area.

Valocity: $270,000 (low confidence)