How is a Rating Value determined and what does this mean?
Homeowners in most regions tend to receive their updated Rating Value every three years. This will inevitably raise some questions such as how is a Rating Value determined and what does this mean?
The calculation of Rating Values and how they impact on rates is reasonably complex and varies between Councils. However you feel about them, the effectiveness of the process needs to be kept in the context of its purpose and how Rating Values are subsequently used.
Rating Values are calculated using a process called mass-appraisal. In its simplest sense, relevant property sales which occurred in a specific location around the region’s revaluation date are used to establish a market trend, which is then applied to similar properties in the area. The mass-appraisal process is supported with a proportion of valuation assessments being undertaken of individual properties every year as a result of building consents that were issued, subdivisions, sales inspections, objections and ratepayer requests to update Rating Values. Not every property can be individually inspected.
When viewing the residential property value index over time across New Zealand, you can see the consistent growth in property values which occurred up until late 2007/early 2008, and the fluctuations in property values that have occurred since. This varies from region to region with some having greater declines and others flattening, which has been seen recently in Auckland and Wellington.
The process for calculating Rating Values is independently audited by the Office of the Valuer General and stringent quality standards need to be met before a revaluation is confirmed.
The 2010 Rating Values will not be used for rating purposes until the July 2011 – June 2012 financial year as specified by law. Just because your Rating Value may show a change in value, it does not necessarily mean that your future rates will proportionately change. The total amount of rates required does not change as a result of the total value of properties in the district. Rating Values are just one component which is used to determine the share of the total rates that individual ratepayers need to pay.
The relationship between rates and Rating Values is not simple, and it will always attract some deliberation. If you have any questions, please view the additional information on the Understanding your rating value or contact QV on 0800 787 284.