What does CV, RV, GV and market value mean in New Zealand?

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(updated October 2019)

In the real estate industry in New Zealand, phrases like CV, RV, GV and market value often get thrown around and can be confusing for those who do not really understand the terminology, especially since they are often used interchangeably. 

I often get questions from owners in the Eastern Suburbs as to how they should value their home (understand the current local market statistics here). The Eastern Suburbs include the ever-popular areas of Kohimarama, St Heliers, Orakei, Mission Bay, Glendowie, Meadowbank, St Johns, Stonefields and Remuera. Needless to say, properties in these areas are highly desirable and frequently ranked at the top of Auckland’s most expensive suburbs.

Another common question at open homes is the percentage of the selling/asking price above or below CV or GV. 

Buyers and sellers alike care about these figures (notwithstanding the misunderstanding over the use of CVs). As a homeowner, you should too. The aim of a good real estate agent is to bring these two parties together at a price which accurately reflects the property’s value.

This article aims to address these questions and share my thoughts on these “V”s, especially in relation to properties in Auckland and the Eastern Bays and Remuera. These concepts are generally applicable to other areas around New Zealand, although there are certain nuances across different regional councils.

capital value / rateable value / goverment valuation, Ruoxi Wang, Eastern Suburbs' Specialist, ray white, orakei, mission bay, kohimarama, st heliers, st johns, glendowie, top real estate agent

Capital value (CV) is the likely price a property would sell for at the time of the Council’s valuation (usually done by a valuation service provider on behalf of the Council). This is typically determined using a mass appraisal process – valuers consider relevant property sales from an area around the time of the valuation. The market trend is then applied to similar properties through a computer based valuation model.

The CV, also known as Government valuation (GV) or Rateable value (RV),  is used by Auckland Council for rating purposes (i.e. the basis for the calculation of annual property rates on a particular property which is payable to the council). 

Some people use the term “RV” when they are referring to a registered valuation – a registered valuation is done on the particular property by a registered valuer (hence the term) and will reflect what the valuer thinks the property is worth (for more details, keep reading).

The last general revaluation was set in July 2017 and the next one will be done in 2020. The CV for each property is publicly available on the Council’s website – check it out for free!

CV or GV is made up of 2 components:

  • Land Value 
  • Value of Improvements 

Land Value is calculated based on the recent sales of vacant sections in the area. It is largely affected by the Unitary Plan zoning, which essentially states what you can do with the land and how much you can intensify it. 

In certain areas of Glendowie or Orakei, due to the Unitary Plan changes, land value has increased drastically as the Mixed Housing Urban zoning makes the land much more valuable – 3 dwellings can be built as of right subject to compliance with certain standards.

Improvements refer to anything that is on or for the benefit of the land. This will typically include the home that sits on the land, the landscaping, driveway etc or, if it is a section, any work completed, such as services installed, landscaping or driveway access.

It is important to note that this does not mean the replacement cost of buildings and services on a property and should not be used for insurance purposes. 

If you want to calculate the replacement cost for insurance purposes, I would recommend using the following calculator as a good starting point and consider engaging a valuer specifically for insurance purposes. 

How does Auckland Council calculate my CV or GV?

How does Auckland Council calculate Capital Value

Auckland Council (or to be pedantic, the valuation service provider) compares recent sales in the area with the property being valued and considers the following factors when determining the CV: 

  • property type
  • location
  • land size
  • zoning
  • floor area
  • consented work (renovations, new build, subdivisions etc.)

A zoning change under the Auckland Unitary Plan may affect a value if it changes the way a property can be developed (such as housing intensification) or used (such as a change from a residential to a business zone).

Why can't I use the CV or GV as my property 'value' since it's free?

Like many residential property owners, you may be delighted at your property’s new (and probably higher if you have bought your property a long time ago) rating valuation. Ka-ching! You will also probably think this is a free and easy way to estimate the current market value of your home and also what sum you should insure your house and property for.

But Auckland Council has been explicitly clear that its revaluation process is not to provide values for property owners – for marketing, sales or any other purposes. It is done primarily for rating purposes and Auckland Council is required to do this by law.

Does that mean the CV or GV is irrelevant to me as a seller?

Short answer: no.

The CV or GV is relevant if you are the seller. Rightly or wrongly, buyers still use CV or GV as a rough reference point, especially if they are just starting to do their research. An easy way is to think about CV or GV as a general brochure of all possible goods sold in a supermarket. It is, therefore, still important to examine the general trend in your local area: the % above or below CV most properties are selling for

If the general trend in your area is that properties are selling slightly below or at CV or GV,  then you can well expect that buyers who come to your open home will be expecting to pay that amount. In the current Auckland market, we see some properties selling below the latest CV which is not at all unusual. The media does blow this out of proportion and cite it as gospel truth of a crash. 

Help! I am asking for less than my CV!!

Therefore, if your CV is ridiculously high, you might be doing yourself a disservice and scaring away potential buyers. As such, I would suggest that the marketing advertisements of your home stress that CV should be absolutely disregarded!

Help!!! My CV is too low and does not reflect the true value of my home!

On the flip side, if your CV is too low, then a competent real estate agent will help buyers see the value of your home above that amount. This may be a more difficult conversation to have in a stable market where buyers are more picky“List and Pray” agents will, unfortunately, ‘let the market do its job’ and you will be the one paying for it – avoid them at all costs.

Most importantly, remember that each property is unique and not all factors are considered in the calculation of the CV – for example, work carried out that did not require a consent, renovations completed recently and the standard of renovation and chattels. 

The fact is that the CV is the result of a mathematical algorithm and is therefore an arbitrary figure. No one made a physical inspection as part of the CV assessment. Broadly speaking, those properties with a high land area are most likely to have a CV higher than the market value. 

This is because a land area that is large might not actually be suitable for development either because the land is oddly shaped and cannot be maximised or the land is too steep such that building on it will be too expensive. 

So what is the true value of my home?

Market value is what you should be paying attention to, especially if you are a buyer.

It is the probable price a home would sell for at any given date (i.e. what a willing buyer will pay) and is made up by two factors: market factors at the time and individual property characteristics.

Market factors include the following:

Supply and demand – the number of homes available versus the number of buyers looking. If demand for houses increases faster than supply, prices go up. In particular:

  • prices of properties currently for sale in your area and recently sold properties
  • general availability of properties for sale in your area – statistics covering a large geographical area like Auckland should only be used as a general gauge on the market pulse. The statistics for specific areas such as the Eastern Bays and Remuera are much more relevant as buyers are generally not indifferent to staying in any Auckland suburb and have specific requirements to stay in particular areas (even down to individual suburbs like Glendowie or Kohimarama either due to school zones or proximity to CBD).
  • for investors
    • immigration levels as this affects demand for rentals and owner-occupied properties.
    • Unemployment levels 
    • Regulations etc – in summary, adverse regulations to investors reduce investor demand (especially from speculators). See for example upcoming changes to the Overseas Investment Act 2005.
    • Demographics – Demographics are the data that describes the composition of a population, such as age, race, gender, income, migration patterns and population growth. These statistics are an often overlooked but significant factor that affects how real estate is priced and what types of properties are in demand. It is especially important if you are speculating on the next ‘Ponsonby’.
Strength of economy

The strength of the overall economy significantly impacts the real estate market as consumers’ ability to support housing prices largely depends on key factors like GDP, unemployment, inflation, manufacturing activity and income growth.

Mortgage interest rates and the trajectory of interest rate movements – tip: it’s more than just knowing the Official Cash Rate (which is simply the rate of interest the Reserve Bank of New Zealand charges banks who borrow from it) since banks in New Zealand obtain their money from many different sources (including from offshore), so the OCR plays only a small role in affecting overall home loan rates. The recent US Federal Reserve Rate hikes may soon have a flow-on effect on New Zealand, whether from a currency or interest rate perspective. 

That being said, rising interest rates represent a double-edged sword. As it becomes more costly for investors to finance acquisitions and development and can adversely impact property values / rental yields, it is also a sign of a growing economy, which typically translates into more demand for space, inbound immigration and higher rental rates. 

A short note about general availability of credit

General availability of credit – an example of this would be the loan-to-value ratios (LVR rules)

  • The LVR is a measure of how much a bank lends against a property, compared to the value of that property. It’s usually expressed as a percentage – for example, say you want to buy a house costing $500,000 and have a deposit of $100,000, you’ll need to borrow $400,000. This means your LVR will be 80% – meaning the loan represents 80% of the value of the home.
    • For owner-occupiers: the LVR rules remain unchanged at 80%. But 15% of each bank’s new mortgage lending to owner occupiers can be at LVRs of more than 80%. This means Kiwis with a deposit of less than 20% may be able to secure home loans. For new builds, the deposit is 10%
  • For property investors: the LVR rules are now at 65%. 5% of each bank’s new mortgage lending to residential property investors can be at LVRs of more than 65%.
  • There are other factors that can affect the amount that a bank is willing to lend, including calculations of expenses and existing debt serviceability. The ongoing investigations into banking culture and responsible lending in Australia and New Zealand are certainly not helping. Buyers should expect a tightening credit environment, with banks scrutinising living expenses and existing debt. 

Speak to a mortgage broker (contact me if you need any recommendations!) about your borrowing capacity.

  • The existing and potential use of the land – for most properties in the Eastern Suburbs (and Auckland in general), a large proportion of their values lies in the land component given the scarcity of land in Central Auckland. Land with huge developmental potential under the Unitary Plan will often command a large premium, but this is also affected by the prevailing sentiment amongst developers and the availability of credit. The largest premiums typically accrue to large flat land sites with easy access to services (stormwater, wastewater etc) and potential for intensified housing.  

Individual property characteristics include:

Location, location, location

Location, location, location – this is the most important and affects many other factors such as school zones, sea views, access to amenities etc. Economists encapsulate “location” in something called “hedonic pricing” – for most homes, this translates to some key factors that impact your life and your lifestyle.

  • These factors are not independent of one another. To give an example, many parents want to drop their kids off and pick them up at school as part of a reasonable commute to and from work. These three preferences – proximity to school, work and entertainment/shopping — are a trinity that make for immensely valuable property.
  • Homes that are zoned for popular schools in the Eastern Bays (for example Glendowie College, Glendowie Primary School, St Heliers Primary School) will sell for a higher price than the same type of house without such zoning, especially if that house has a choice of two primary schools.
  • Proximity to local employment opportunities can be a high priority for most employment-age buyers but the type/price range of the property will dictate the type of buyer pool.  This means that buyers may prefer areas from Orakei to Mission Bay, which are closer to Auckland CBD and thus translates into a shorter commute to work. However, there are other buyers who may be used to travelling for longer distances or work from home, especially with technology and workplace changes.
  • Properties near bus routes,  train stations (e.g. Meadowbank and Remuera), and motorways as well as those near supermarkets, shopping malls (e.g. Eastridge), parks (e.g. Churchill Park) and hospitals are preferred by more buyers and sellers can demand higher prices.
  • In the same vein, homes that have sea views (e.g. houses/homes in Ronaki Road or Riddell Road) can add up to 108% on average in Mission Bay compared to one without.

Potential to add value such as short-term rentals

The potential to add another storey, increase the number of rooms or add separate dwellings for Airbnb/home and income can often increase the value of the property. The operation of short-term rentals is a very interesting and fast-developing area that are being advertised in many listings. 

However, the true work involved and the changing regulations and costs (see Auckland Council’s changes to the online accommodation provider rates) are some aspects that many overlook. Talk to me if you want to know more – I’ve some personal experiences with operating an Airbnb.

Size and design

  • Floor area: The larger the property area and the home, the more expensive a house can be. If your home has several bedrooms, it is more likely to sell for a higher price as opposed to a property with only one bedroom. In some instances, though, a home with fewer bedrooms but large ones can be more appealing than a house with many but smaller bedrooms.

  • Layout: The layout of the house has an impact on the value of the property too. An open layout, with less walls and partitions, looks more spacious and this illusion can convince a home buyer to pay more because it looks bigger than its actual size. Buyers also like open plan kitchen/living, living area that flows out to the decks and garden which is level with the living areas so that young families can watch their children play. Therefore, houses in the Eastern Suburbs where the kitchen/living area opens up to the swimming pool are more attractive than those where the bedrooms open up to the swimming pool.

  • Bathrooms – if two identical properties were on sale in the same street, the one with the additional bathroom will sell for more. This is especially important for houses with many bedrooms but too few bathrooms. 

  • Number of storeys: single level homes generally cater to a wider group of buyers as the older buyers particularly like them. Two storey homes with at least one bedroom downstairs are also pretty popular. However, houses with 3 or more levels can deter lots of buyers, especially those with extended families (elderly parents). In fact, I know of a stunning property in St Heliers that has proved difficult to fetch the price it deserves simply because there are too many flights of stairs.

Internal condition

While some buyers actively seek out “do-up” properties, most home buyers prefer a house that is move-in ready – and they are willing to pay a reasonable premium for that comfort. As such, updated kitchens with the latest appliances, floor replacements, repainting and landscaping may add value to a house. 

However, do not be one of those that spend too much and not get a return on investment when they sell the house. (i.e. overcapitalise). Speak to a real estate agent (or read this article) to understand what the potential buyers look for before spending that money. I also have a NZ Herald article about this

Parking spaces (or the lack of)

Given the explosion of the number of vehicles on New Zealand’s roads (just witness Auckland’s traffic jams), the availability of parking space (either onsite or off-street) has become an increasingly important consideration for buyers. Houses with large garages and workshops are pretty rare and are extremely popular when they do come onto the market in the Eastern Bays given that there are a few car fanatics in the area.

How do I work out the market value of a particular property?

There’s no substitute other than research and understanding the local market. When you do your own research, you will have a much better understanding of the likely price range homes are selling for in the areas you are keen on or looking to sell. (Hint – read my monthly report on the local market statistics and for on the ground feedback)

Option 1: Pay and obtain a Registered Valuation

Registered valuations (not to be confused with rateable values) are provided by registered property valuers who are impartial property professionals who are trained to assess the market value of your property.

They should have in-depth knowledge of the real estate market, particularly recent sales in your area and an understanding of building methods, architecture and style. They will also be familiar with district plans, the Resource Management Act and government legislation. In a fast moving market, it can be difficult for anyone (including for valuers) to accurately appraise a house’s market value because it is constantly changing.

Whether you need a private valuation prior to a sale is a common question that sellers ask. It can sometimes be helpful having the back-up of a registered valuation to justify your asking price, and if done, this can be presented along with the suite of documents available to potential buyers on a non-reliance basis

Although it is the primary responsibility of a buyer to get one done if required by their bank for mortgage approval purposes (which is becoming increasingly common), it can save them time and money if you have already had one completed (for a fee, valuers can often re-address a current valuation to the buyer or a buyer’s bank but banks often demand an independent valuation from a random valuer on their panel to eliminate abuse/fraud). 

However, the problem with getting such a valuation report is that these are often done in advance and by the time your property is listed for sale, the market may have already moved and the report does not fully capture the existing market sentiments. It is certainly something to be discussed with your agent. 

You may also look at ‘free market valuations’ such as Homes or Oneroof but be careful around those – they are also algorithm-generated and do not account for individual characteristics of each property. However, they may be more up to date than CVs given that they (based on their published methodology) rely on more recent sales. Another cost effective method is to obtain an ‘E-Valuer’ report from Quotable Value which can often give you a ballpark figure to work with.

Option 2 (free): Talk to a real estate agent - and become an expert on your chosen areas

Real estate agents know how much homes are selling for in your desired areas at any given point in time. They have access to the latest market data, including comparable sales and sales that have not yet been registered in these systems such as Homes.co.nz or TradeMe. They know exactly what your competition looks like. 

If you are a buyer, they know what the other buyers in your desired areas are looking at and often their budgets.

If you are a seller, they know what the houses are asking for or the differences between those houses and yours that may justify a different asking/sale price. They can also provide you with information on the buying or selling process, including how to bid at auction or negotiate. 

Talking to a real estate agent is a great place to start if you need help understanding and estimating market value and best of all, it is free!

How can I appraise and help you sell your property?

As professional and ethical real estate agents, our appraisals always include a comprehensive list of recent local sales of comparable homes built of a similar age, size and number of bedrooms, situated on a similarly sized plot of land. 

We will also include a brief description at the bottom of each individual sale and highlight certain features so that you can better understand how that house compares to yours and therefore what the likely price of yours would be. 

Many times, we would have already viewed these listings so I know the exact condition of the comparable properties (instead of just relying on the edited listing photos) as well as the layout of those houses. We can therefore choose the appropriate comparable houses to generate the appraisal. 

What we (and a good real estate agent should) never do during an appraisal

Sellers will invite a few real estate agents to provide a free appraisal on their home. That is absolutely fine and should be done in order to find the right agent who can work best with you to achieve your goals. Don’t just choose an agent because he/she is your friend. 

Many real estate agents will provide a price which is often at the very top of comparable properties. This is designed to get you to list with them (in industry parlance, this is called ‘buying the listing’) because you believe (or want to believe) that they will be able to achieve that figure – otherwise, how can they say so?

This is a practice we (or any honest agent with your best interests at heart) do not engage in (check out this article about people condemning such practices) – we appraise realistically and believe in building a long term, honest and open relationship with our vendors right from the start. 

Happy vendors, happy sale, happy agents! 

Why is a realistic appraisal and listing price so important?

Have you ever heard of a property being on the market for a long period and getting a higher price than what was initially priced? I have never heard of it because it doesn’t happen

Time is NOT your friend when you are putting your property for sale in the market. The longer a property is on the market, the higher the chance that it will sell for a price much less than it should have, simply for the fact that it is a stagnant listing and buyers often think that something is wrong when nobody else is interested. 

The reasons we always appraise a house realistically are because they are in your (the seller’s) interest:

  1. Buyers are well attuned to the listings in the local market. They can spot an overpriced property from afar. The best sign of this is when you either have empty open homes or very well-attended open homes without any sign of a genuine buyer. Delays in the sale will cost you time and money, not to mention the amount of wasted effort in preparing your home for sale.
  2. Instead of a ‘rich’ foolish buyer who does not understand market value and makes you an unbelievably high offer, you will more likely have an even higher chance of securing a price that is below market or at least below what you could have achieved if you priced appropriately at the start. Why? When listings become stale, they become ripe for bargain hunters to beat you down in price. Psychologically, having invested so much time, effort and money in the selling process, you will also be more likely to accept such offers, especially if there is time pressure to sell that property.

If you have priced your property appropriately at the start, buyers will show urgency when the property is new to the market because it looks well priced (and by extension, a realistic seller) and a “value for money” buy. Everyone flocks to what they think is a good deal. This generates a buzz at open homes and creates buyers’ competition when there are multiple offers – that is the key to obtaining a higher price. 

Even if you have sold your house at the realistic appraised price, you would have gained by selling your property on a timeframe which you are comfortable with (time is money) and without the additional stress generated from an unnecessarily prolonged listing campaign.

Found this post useful and have more questions? Or still confused?

Please get in touch and I am happy to have a chat over coffee! (Contact details below)

Disclaimer: Yes, I am a licensee salesperson under the REAA 2008, but I am not your salesperson and this article does not create any relationship between you and me (other than reader and author of course). All the information on this website is published in good faith, for general information purpose only and should not be seen as specific financial or investment advice. I do not make any warranties about the completeness, reliability and accuracy of this information. Any action you take upon the information you find on this website is strictly at your own risk. 

Copyright: The material contained in this website, including property information and images, may not be used in any way without the express permission of NZ Premium Homes or Ruoxi Wang.

Contact Team Ruoxi & Dickson for a 10-min chat today!

If you want to sell your home for the best possible price and are looking for a competitive and top performer to showcase your home in the best possible light using cutting-edge marketing techniques, then let’s have a chat today. 

+64 22 683 6391 (Ruoxi) | +64 22 647 2635 (Dickson)

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