Rating values - can they be trusted?
Rating values are the values that are adopted by your council in order to set your property rates. Most councils have their rating values assessed every 2-3 years. The council doesn't actually do the assessments themselves - they hire a valuation company to carry out the work.
So why is there so much variation in the accuracy of rating values?
Some houses sell for bang-on their rating value, but many houses sell for less, or much more.
The problem is two-fold.
QV (Quotable Value) or whoever does the rating values in your area simply don't have the resources to visit every property. There has to be some sort of in-house assessment with the help of a computer.
The problem is that a computer is only good at working things out when the correct data being fed into it.
If no-one has actually inspected your property and seen the shiny new taps, or the gap where you removed the supporting wall, then how will the computer ever work out a fair value?
It can't. Not very accurately anyway.
The other issue with rating values is timing. To get the new rating values out on time, the sales data, research and calculations have to be carried out well before the release date.
Unfortunately what happens then is very much like the fashion industry. By the time we hear what's in, it's out! Argghhh!
Here is a quote, taken directly from QV's web site:
"While RVs are based on market sales, they are a snapshot of the property market at a single point in time. As real estate generally has tended to fluctuate over time, an RV cannot be expected to represent the true value for long"
Here's the secret to getting a grip on what a property is really worth :
So why is there so much variation in the accuracy of rating values?
Some houses sell for bang-on their rating value, but many houses sell for less, or much more.
The problem is two-fold.
- Houses, unlike cars or washing machines, are all unique. It is impossible to create a computer formula that will accurately predict the exact sale price of any property. There are too many variables.
- The rating valuers do not inspect every property - thus nobody knows the quality of the variables anyway.
QV (Quotable Value) or whoever does the rating values in your area simply don't have the resources to visit every property. There has to be some sort of in-house assessment with the help of a computer.
The problem is that a computer is only good at working things out when the correct data being fed into it.
If no-one has actually inspected your property and seen the shiny new taps, or the gap where you removed the supporting wall, then how will the computer ever work out a fair value?
It can't. Not very accurately anyway.
The other issue with rating values is timing. To get the new rating values out on time, the sales data, research and calculations have to be carried out well before the release date.
Unfortunately what happens then is very much like the fashion industry. By the time we hear what's in, it's out! Argghhh!
Here is a quote, taken directly from QV's web site:
"While RVs are based on market sales, they are a snapshot of the property market at a single point in time. As real estate generally has tended to fluctuate over time, an RV cannot be expected to represent the true value for long"
Here's the secret to getting a grip on what a property is really worth :
- Forget about the rating value or put very little weight on it
- Do your own market research by keeping a good eye on what is selling in your neighbourhood and making your own, informed judgements
- Make sure you compare apples with apples. Don't compare houses with views, with those that don't have views - there can be hundreds of thousands of dollars difference in value. Only compare houses that are of a similar floor area and have a similar land area. The size of a dwelling and the overall land area, particularly on flat sites, are major value determinants.
- Try and be objective and impassionate about your sales research and making comparisons. If you've already fallen in love with something, it's probably too late!
Next Article: Houses that Won't Sell