What is the impact of the Auckland Council Revaluation 2021?

Brought to you by the Valocity Research Team: Wayne Shum and James Wilson

Background

Under the Rating Valuations Act 1998, all Territorial Authorities are required to revalue the district within a three-year period. The last Auckland General Revaluation was in 2017. The COVID-19 lockdown in April 2020 made it difficult to conduct a reliable revaluation, and as a result, and at Auckland Council’s request, the Office of the Valuer-General agreed to defer the 2020 General Revaluation to 2021.

The Auckland property market has grown significantly since the Revaluation in 2017. Ratepayers and media were questioning whether the substantial rise in rating valuations expected in 2021 may lead to the same proportional increase in rates payable. However, this is not the case. For example, in the previous General Revaluation in 2017, the residential sector showed an average increase of 46%. The general rates however, increased only 2.5% when the valuations were used to calculate rates.

The 2021 Revaluation will be as of 1 June 2021 and will be released to the public after October 2021. Ratepayers will have the opportunity to object to valuations should they disagree with the outcome. The valuations will be used to set rates from 1 July 2022.

How Rating Valuations are set

Rating Valuations are calculated by comparing recent sales in an area, with considerations made for:

Property type
Zoning
Size, age, condition and quality of the home and amenities
Location
School zones
Desirable outlook

The valuations are calculated using mass-appraisal methods – not all properties are physically inspected by valuers.

A rating valuation comprises of three parts;

Capital Value, which is the appraised fair market value excluding chattels
Land Value, which is the appraised fair market value of the unimproved land
Value of Improvement which is the added value of improvements to the land at time of valuation e.g. dwellings

All Rating Valuations are set on freehold basis and are exclusive of chattels.

So how are the Rates set?

The Rating Valuation of a property is only one of the factors used to determine annual rates payable by households. The overall changes in valuation does not equate to the changes in rates. Other factors involved are:

Actual use of the property
Targeted Rates applied for a location
Growth in number of property assessments
Overall Council Budget requirements

The 2021 General Revaluation will be used for Rates for the 2022/2023 financial year. Auckland Council hopes to raise $2.249 billion from rates for the 2022/2023 financial year, an increase from the previous 2021/2022 year which contributed $2.138 billion.

Potential Impact of Capital Value Movement

To understand the impact that the increase in capital values might have on ratings, we have compared the median Capital Value to the median Valocity AVM estimate by suburb and property type to determine the value movements since the last Rating Valuations were set.

Property Type	Median Capital Value	Median AVM Value	Percentage Change
Apartment	$560,000	$640,000	14.3%
Dwelling	$970,000	$1,251,184	29.0%
Unit / Townhouse	$680,000	$850,131	25.0%

Table 1 – Overall movement for Auckland

Conclusion

Lower priced suburbs have experienced higher increases since 2017
Suburbs near town centres and arterial roads such as Panmure, Mangere East and Waterview that are primed for redevelopment also experienced higher than average value growth – perhaps a result of unitary plan zoning incentivising developers to outbid occupiers
While rates increase year on year, only those with higher than average increase to their valuations will receive higher than average increase to their rates, relative to other property owners
It is anticipated that this revaluation may introduce new apportionments between Capital Value, Land Values and Improvement values which take into account the fact that land values are driving growth, with zoning changes facilitating further intensification

For further information or if you would like to understand how the Auckland Revaluation may impact your portfolio please contact wayne.shum@valocityglobal.com or james.wilson@valocity.co.nz

Appendix:

Overall movement for Auckland by Suburb

Dwellings			Units / Townhouses			Apartments
Suburb	Change	No of Properties	Suburb	Change	No of Properties	Suburb	Change	No of Properties
Omaha	57%	1256	Snells Beach	38%	62	Mangere	43%	118
Clendon Park	47%	1865	Morningside	36%	350	Flat Bush	38%	116
Mahurangi East	46%	104	Waterview	35%	194	Point Chevalier	35%	50
Matakana	45%	259	Rosehill	35%	89	Mount Roskill	33%	90
Otara	44%	3145	Ranui	35%	428	Avondale	31%	158
Rosehill	43%	942	Mangere East	35%	484	Onetangi	30%	50
Tawharanui Peninsula	43%	231	Botany Downs	34%	196	Otahuhu	30%	53
Henderson Valley	43%	405	Kohimarama	33%	382	Kingsland	29%	258
Mangere East	42%	4077	Warkworth	33%	132	Panmure	29%	86
Manurewa East	42%	903	Gulf Harbour	33%	321	Oteha	28%	178
Wiri	41%	508	Sunnyvale	33%	283	Gulf Harbour	27%	134
Waiatarua	40%	246	St Heliers	33%	769	East Tamaki	27%	117
Red Hill	40%	658	Kelston	32%	94	Birkenhead	25%	271
Westmere	39%	1493	Sunnynook	32%	209	Manurewa East	25%	71
Golflands	39%	822	Randwick Park	32%	54	Kohimarama	25%	153
Kingsland	39%	522	Clendon Park	32%	149	Mount Wellington	24%	344
Wellsford	39%	688	Manurewa East	32%	142	New Lynn	23%	535
Manurewa	39%	7211	Pahurehure	31%	74	Remuera	23%	1131
Panmure	39%	1501	Mellons Bay	31%	96	Orakei	23%	122
Algies Bay	39%	396	Totara Vale	31%	341	Onehunga	22%	535
Mangere	39%	3515	Glendowie	31%	169	Hobsonville	22%	571
Waterview	39%	954	Kingsland	31%	75	Papakura	22%	62
Clover Park	38%	1830	Otara	30%	66	St Heliers	22%	351
Leigh	38%	474	Golflands	30%	144	Stanley Point	21%	60
Point Chevalier	38%	2434	Half Moon Bay	30%	593	Papatoetoe	21%	70