House prices and GVs

November 25th, 2012 at 10:00 am by David Farrar

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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19 Responses to “House prices and GVs”

  1. duggledog (1,559 comments) says:

    Poorly educated, non-critically thinking children writing trash

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  2. Pauleastbay (5,035 comments) says:

    Whats this profit talk, unless you are going to go live in a shoe box any “profit ” is just going to go into another house or you move to Invercargill and live on your savings

    You buy a shitter for 500, you spend 150 doing it up, you sell it for 700. 50 k up so what. This is how neighbourhoods get done up and slums re-born, saving land and materials.

    Kirsty Wynn might figure this out by the time she gets to 21

    And any CGT will only be on the 50 K so the greenies will get $12,000 which you should have been able to wrangle on GST during the project.

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  3. Harriet (4,986 comments) says:

    Yeah duggledog, even a bit of basic maths wouldn’t go astray in a journalist degree.

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  4. infused (656 comments) says:

    Writing for the retards.

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  5. ross69 (3,652 comments) says:

    To be fair, the article does quote an expert who says that council valuations are “meaningless and that even registered valuers were struggling to find accurate prices at the moment.”

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  6. ross69 (3,652 comments) says:

    However, what the writer seems to ignore is that sellers typically become buyers. Someone selling a million dollar property might be paying more for their next property…so it is difficult to see how such people are “winning”. Moreover, the Auckland property market could crash and relatively expensive properties could drop substantially in value. But again, that won’t necessarily be a big deal for sellers as they will be buying cheaper than they are now.

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  7. Rab McDowell (6 comments) says:

    The value of a property, or anything for that matter, is the price agreed between a willing but not too willing seller and a willing but not too willing buyer, not what some government bureacrat or some computer programme thinks it should be.

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  8. mikenmild (11,247 comments) says:

    One thing the article does not make clear is the difference between CV and what a property is actually woth – the only valuation that counts is one determined by buyers at a sale. Mnd you, DPF doesn’t help by referrng to GV either. Does Auckland have one date for revaluations?

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  9. dime (9,980 comments) says:

    to be fair, they do have to churn out their alarmist cost of housing article every week….

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  10. slijmbal (1,236 comments) says:

    Whilst the logic in the article is flawed it’s pretty clear that house prices in several areas in Auckland are on a roll. Spent a chunk of time house hunting as have several friends/colleagues in nicer areas but not the rich ones. The amount of stock for sale is low, houses are turning over very quickly and whereas a year ago CV tended to approximate the price it is now typically at least $100K under the sales price. Auctions are doing rather well.

    Anyone with any sense buys 1st and then sells in this market as the prices are moving too quickly. All it does is make the cost greater if one is moving to a better property – nice if downsizing though.

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  11. duggledog (1,559 comments) says:

    Wallace Chapman got torn a new ass hole (although only a small one) by Sir Bob Jones on Radio Live this morning about the topic of housing.

    Worth listening to. Poor old Wal thinks it’s a basic human right to have a house because it’s in the UN bill of rights or something. As Bob reminded him, sure it is but saying it doesn’t make it so. Classic

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  12. peterwn (3,277 comments) says:

    Dilemma here – i you are not selling any time soon you want to have a low GV to keep the rates bill down. Opposite if you are planning to sell. So the former are going to keep their traps shut if they think the valuation is too low.

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  13. Mark (1,488 comments) says:

    I am a valuer and Government Valuations have never been a particularly accurate guide to property value. Their purpose is to establish a rating base not give a guide to buyers as to the value of a property.

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  14. reubee (24 comments) says:

    I am sure there are some people in Christchurch who wish they had a more accurate valuation.

    If you do hundreds of thousands of improvements and don’t update your council valuation, then you are taking a risk, as well as not paying your share of rates.

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  15. gazzmaniac (2,307 comments) says:

    reubee – there is no need to get the council to revalue your house. If you do work to your property you can get a private valuation and report which will stand up far better than a GV.

    As for “not paying your fair share of rates” – with rates rising faster than inflation I would like you to seriously look a ratepayer in the eye and say that.

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  16. seanmaitland (501 comments) says:

    @reubee- sorry but that is absolute rubbish.

    If I spend 20k landscaping my house, why should my “fair share of rates” be more?

    The only answer is you are an idiot.

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  17. wreck1080 (3,924 comments) says:

    The herald can sell another 20k copies by putting in articles on house prices.

    However, it is without doubt central Auckland areas have had massive price increases.

    Bob Jones article in the herald last week that people should simply lower expectations was completely wrong too.

    Houses in even bad suburbs are more expensive as a multiple of income. Sure, people who 10 years ago could have afforded a central suburb now have to settle for worse suburbs. But, where do the people who used to buy in ‘worse’ suburbs buy? The options for lowly paid wage slaves are disappearing.

    Auckland is seriously fucked. Funny, for a small city to have such problems. I wonder how much the brain drain has resulted in this mess. All the smart people left and fellas like Len brown are filling in the slot.

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  18. reubee (24 comments) says:

    I appear to have touched a few raw nerves.

    @gazzamaniac – I won’t disagree with you over levels of council spending.
    @seanmaitland – poor example, spending 20k on landscaping won’t add 20k of value to your property.

    What I am getting at, look at the example quoted in the article. CV 1.7m sold for 2.8m. Is that owner currently paying rates based on a property value of 1.7m or 2.8m. Probable answer is 1.7m. They are avoiding paying a couple of thousands of dollars in rates every year until the next revaluation catches up with them, if it does…

    By not getting the CV updated, you also cut down on your options here http://www.stuff.co.nz/the-press/news/christchurch-earthquake-2011/5183313/How-it-works-payout-case-studies. You are relying on option B and your insurer to agree with your valuation of the improvements to your property. I’m sure there would be less hassle with option A.

    So why haven’t the owners updated the CV as soon as they have finished the improvements, possible answer is they don’t want to pay more rates. Same with David’s neighbour. Did they update their CV after spending 300k? I bet the answer is no because they didn’t want to pay more rates.

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  19. BigFish (132 comments) says:

    It does seem that the Auckland papers like to cook up housing price stories.
    Feels like they’re trying to force bubbles and busts with their hype / doom headlines on the front page. Hard to imagine these headlines don’t have some influence over buyer behavior and risk appetite.

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