Capital Value (CV)
The capital value (CV), is the value your local council or government authority places on your property. Councils use this valuation to determine how much they should charge you in annual rates.
As a result, the CV is also sometimes referred to as a rateable value (RV) or as a government valuation (GV). It’s a basic valuation system that focuses on things like location and size and how similar properties in the area have sold recently as opposed to added value like a recent refurbishment of a building or landscape. Of all the valuations the CV has a tendency to value your property lower than the other systems, as it doesn’t take into consideration the finer details.
Your CV is a snapshot of the value of your property at a specific point in time, and tends to be reviewed every few years. You can find out the CV of your property on most council websites.
A registered valuation is the value placed on your property after it has been inspected and assessed by a registered valuer. A registered value takes into account the full value of a property and its land based on the size, condition and local market. The more experienced your valuer is with the local market and the industry in general, the more reliable their valuations will be. This registered valuation system is governed by the Valuers Act (1984) and provides the truest representation of what a property is really worth.
You would look at getting a registered valuation made on a property if:
- You wanted to sell your property and needed to know what price to list it at
- You wanted to buy a house and wanted to make sure it was priced fairly
- You were taking out a mortgage and needed the valuation for the application
- You wanted to refinance your mortgage.
Registered valuations are extremely important to banks, who take on high risk by lending you the finances to purchase a house. The Valuers Act (1984), provides banks with certainty that any registered valuations done are independent and reflect the true value of a property (and the money a bank could recoup if it needed to sell a property if a client defaulted on their mortgage).
Banks use the registered valuations to calculate how much they are willing to lend. The calculations also incorporate your age, income as well as to a slightly smaller degree the rateable and market values.
A market valuation is what buyers in a free and fair market are willing to pay for your property. This valuation for your property will fluctuate as the market ebbs and flows.
This valuation system is affected by a number of factors including supply and demand, interest rates, investor taxes, the economy, zoning laws, school districts and much more.
It is the reason we have booms and busts. It also explains why you’ll hear crazy stories of properties selling for twice their CV values in Auckland (where demand currently outstrips supply).
How Can You Work Out the Value of a Property?
Harcourts New Zealand explain it the best on their website when they say: “Rateable value is what you could pay, Registered value is what you should pay and Market price is what you end up paying.”
In essence take a look at the registered value and then factor in the effect if the free market. How much are similar sized properties in the area selling for? Is the property zoned for any popular schools? Is the area being rezoned for apartments or commercial buildings in the near future? Does the property have street appeal, a nice neighbourhood and easy access to motorways? Are there structural issues that need to be addressed, is it a ‘do up’ or can people move straight in?
Talk to the experts, find a real estate agent in the area that comes highly recommended and see what they recommend. Likewise if your brother-in-law just so happens to be a builder, then ask him to look the property over and give you his professional opinion.