House prices and GVs

Kirsty Wynn at HoS reports:

It’s almost as good as claiming Lotto’s first-division prize – the winners in Auckland’s frantic housing market are selling their properties for hundreds of thousands of dollars above their official valuations.

Ummm, no it’s not.

One could sell a house for hundreds of thousands above GV and lose money on the sale.

Official valuations are often massively different from market values. What makes a seller a “winner” is how much profit they made selling a house compared to what they paid for it, plus improvements made.

Statistics show that in the past six months there have been at least nine properties that sold for $500,000 or more above their CV, and one went for a whopping $1.2 million above valuation.

A meaningless statistic.

Another stand-out property was 18 Rangitoto Ave in Remuera, which sold for $2,895,000 in August – $1,175,000 over its recent CV of $1,720,000.

Bayleys Remuera agent David Rainbow, who marketed and sold the property, said buyer competition was fierce.

“Two hundred parties registered from open-home viewings and at auction. Five parties were competitively bidding against each other, which ensured the top price was achieved,” Rainbow said.

He said the CV could be a ballpark figure but a lack of stock and high demand meant the price was pushed up by bidders who all desperately wanted the home.

The house had undergone significant internal renovations and remodelling work that were not factored into the $1,720,000 council valuation.

“A council valuation is a broad snapshot of a suburb, and fails to take into account added-value work that owners have invested in,” Rainbow said.

Exactly. An apartment near where I live recently sold for around $100,000 thousand over GV. However the previous owner had spent $300,000 on improvements – so in fact she lost considerable money on the sale – yet this article’s criteria would declare her a winner.

This is not to say that some people are not making a good profit on selling their houses. I am sure they are. But the comparison should be to purchase and improvement price.

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