Market value vs RV vs sale price: what’s the difference?
Why is a home’s rating value different from its market value? And why might it still sell for something else entirely?
Rating value, market value and sale price are all important measures of a property’s value, but they’re not the same thing. Each serves a different purpose.
Here’s what each one means and why they don’t always line up.
What is market value?
Market value is an estimate of what a property could reasonably be expected to sell for in the current market.
A registered valuer may consider factors such as the property’s location, land and floor area, condition, features, recent comparable sales and wider market conditions.
Market value can change as the property market changes, even if nothing about the home itself has changed.
It can also move if the property is renovated, extended, subdivided or otherwise improved.
What is a rating value?
A rating value serves an entirely different purpose.
Often referred to as an RV, a rating value provides a snapshot of a property’s value at a set valuation date. Its main purpose is to help councils allocate an equitable share of rates across properties.
Rating valuations are produced using a mass appraisal process, which means properties are assessed using sales evidence, property data and valuation models across a whole area, rather than every property being individually inspected by a valuer.
That approach is appropriate for rating purposes, but it differs from an individual market valuation, where a registered valuer will inspect a property and consider its specific characteristics in greater detail.
Because rating valuations are tied to a specific valuation date, they shouldn’t be treated as a live estimate of what a home is worth today. The market may have moved considerably since the last revaluation, which typically occur every three years in New Zealand, while the property itself may also have changed.
So, a rating value can provide useful context when looking to buy or sell property, but it isn’t a current market estimate.
What is a sale price?
A sale price is the amount a buyer and seller ultimately agree on when a property changes hands.
It reflects what happened in one particular transaction at one particular point in time.
That price can be influenced by market conditions, competition between buyers, how well the property is presented and the motivations of the people involved.
A highly motivated buyer, for instance, may be prepared to pay more than others, while a seller who needs to move quickly may accept less.
That’s why a sale price can sit above or below an estimated market value.
Why can market value, RV and sale price all be different?
Because they’re measuring different things.
A rating value is a valuation set at a particular date for rating purposes.
A market value is an estimate of what a property could reasonably sell for under current market conditions.
A sale price is what one buyer and one seller actually agree to.
So, if the three numbers don’t match, that doesn’t necessarily mean one of them is wrong.
The key is understanding what each figure is designed to tell you.
What about online property estimates?
Online property value estimators, such as those found on QV.co.nz and other property websites, can be a useful way to get an indication of what a home may be worth.
They’re typically generated using property data, recent sales and automated valuation models, rather than a valuer physically inspecting the property and considering all of its individual characteristics.
That makes them useful as a ballpark guide, but they’re not the same as a professional valuation completed by a registered valuer.
A registered valuer can take into account factors that may not be fully reflected in the available data, such as a property’s condition, renovations, views, layout or other features that could affect its value.
For important financial, legal or property decisions, you may need a formal valuation rather than an online estimate.
Which property value should you pay attention to?
That depends on what you’re trying to find out.
If you’re looking at your council rates, your rating value is highly relevant.
If you want an independent view of what your home may be worth in the current market, a market valuation will be far more useful.
And if you want to know what buyers have actually been paying, recent comparable sale prices can provide important context.
No single property number tells the whole story.