Advice for paper millionaires
Revaluation time is a chance to build wealth instead of spending as if you’ve hit the jackpot, writes Susan Edmunds.
Homeowners are being warned not to start living like millionaires just because their properties are now worth seven figures.
Councils in many parts of the country are going through revaluation processes that give owners an updated value for their properties. This is done once every three years and the valuations are used to set rates.
In Auckland, the latest rateable value update has lifted the average above $1 million for the first time. It jumped 46 per cent, to $1.09m.
Housing Minister Phil Twyford warned it would be unwise for Auckland homeowners to think they had hit the jackpot and start spending.
Financial adviser Liz Koh agreed. She said people needed to realise that values could go down, too.
‘‘When people feel wealthy they go out and are more inclined to spend. But people need to resist that temptation. Wealth can come and go.’’
She said homeowners would be better to see it as an opportunity to build their wealth and ‘‘keep moving forward, rather than taking a step back by spending it on things that they potentially don’t really need’’.
They could take it as a starting point and work out what they wanted to do.
‘‘They have this much wealth – how do they want to use it? They could lock in the gains for the long term or they might be more interested in spending it now and having a bit less later on. You have to understand the consequences of the decisions you make.
‘‘If you use up your wealth it can set you back and you miss an opportunity to build wealth long term.’’
If you plan to stay in your area, a more expensive house means little because even if you sell, you will have to buy another that is worth about the same. You can only realise that paper wealth if you move to a smaller property, or a cheaper area.
Property Institute chief executive Ashley Church said homeowners should not read too much into the council figures. ‘‘CVs are conducted once every three years and they’re a snapshot of the approximate value of any given property at that moment in time.
‘‘They shouldn’t be regarded as an exact measure of the value of a home – and they’re certainly not intended to provide an ongoing price guide.’’
Properties that experience a bigger value increase than the city’s average are likely to also have a bigger increase to their rates bill.
In Auckland, owners of the city’s smallest homes are expected to be worst hit. Houses smaller than 60 square metres had an average value increase of 52.8 per cent compared with CVs set three years ago, versus 42.2 per cent for the biggest homes.
Homes.co.nz spokesman Jeremy O’Hanlon said: ‘‘The city’s growth has been faster in areas with smaller-sized homes, although they haven’t made nearly as much on their homes as the wealthier, larger ones.
‘‘This is a hard inequality pill for the city to swallow given those more wealthy have netted capital gains in the realm of $400,000 over the same period.’’
He said the city’s new Unitary Plan zones had not played a significant part in the new round of CVs.
Dense zones such as the city’s urban zone and terraced housing zone grew in value by 47 per cent, just $20,000 more than mixed housing suburban, which grew by 44 per cent. But those more dense zones will be able to be subdivided much more heavily.
He said The Block NZ showed the value creation available. The show made more than $5 million in property sales on a single section.
Head of Trade Me Property Nigel Jeffries said there were now 160 million-dollar suburbs in Auckland.
He said 88 per cent of the increase was in land values.
He said South Auckland suburbs have seen the biggest increase, led by Drury (up 94 per cent from $781,802 to
$1.5m), Paerata (up 88 per cent from
$767,536 to $1.4m) and Runciman (up 80 per cent from $1m to $1.7m).
Herne Bay, Whitford and Saint Mary’s Bay were the highest-ranked suburbs, all over $2.8m on average. Mays Rd in Onehunga had the biggest increase in rateable value, lifting 243 per cent from $161,809 to $555,426.
Other areas recently revalued include Ruapehu, Waikato, Invercargill, Kapiti Coast, Rangitikei, Waitaki, Carterton, South Wairarapa, Westland, Thames-Coromandel, Kaipara, Napier, Timaru, Tasman, Masterton, Clutha, Tararua and Stratford.