Your government valuation - a valuer's perspective

Ruapehu Bulletin, Volume 14, Issue 655, 24 September 1996, Page 11

Your government valuation - a valuer's perspective

Southern Ruapehu land revaluations are due out soon, prompting local independent valuer malcolm Hanna to write the following, backgrounding the issue: Government Valuations are a bit like belly buttons - every property owner gets one but not everyone knows why! Actually the "why" is straight forward enough - it's because the Valuation of Land Act, 1951 says so, and in turn that Act says so because way back in 1896 the government of the day decided that there was a need for a centralised system of land valuation by valuers employed by the state to carry out regular valuations of all property in the country for both central and local government. It also decided then that there was a need to define certain types of value and those definitions have since been modified over time to the three phrases "capital value", land value" and "value of improvements" which appear on your valuation notices and rate demands. Obviously it is helpful to know what these mean, and while there are volumes of learned text and case law

on the subject I can very roughly paraphrase the definitions. Capital Value (CV) is the current market value of the property as a freehold at the date of valuation.. Land Value (LV) is the current market value of the land component of the property (again as a freehold) including for site works which have been carried out upon it, but assuming the land to be vacant and otherwise unimproved but surrounded by all existing development. Value of Improvements (VI) is the value added to the land value by the buildings etc., to equate capital value, or put more simply is the difference between CV and LV. These may need a bit more explanation and you should consider the following points: • Market value is the price which would be agreed between two willing but unforced parties, both keen to deal in the market of the day but not so much so that they would overlook normal business prudence. • The land value defini-

tion if applied to your own property would assume the section to be vacant of buildings, fencing etc. (though with, say , the house site excavated or banks retained) but with all the other existing development in the neighbourhood in place. • The value of improvements is effectively just a residual figure being the outstanding balance between the capital value and the land value and is a result of the Act being drafted in a way which allowed land value to be used as a basis for most rating systems. However, it is also the point which creates most confusion for many owners who will say for example "look, my house cost $80,000 to build, so why is my value of improvements only $70,000?" The answer is that given the way the land value is required to be set, $70,000 is, in this hypothetical case, the only available sum to represent the added value between the two main items. Most private valuers are able avoid this problemby treating not only the value of the improvement but also the value of the land on an added value basis, frequently labelling the latter "as an occupied site", but as you have seen this isn't possible under the terms of the Act and hence the confusion. Valuation New Zealand In my view Valuation New Zealand (VNZ - formerly known as the V alua-

tion Department) do a very good job in difficult circumstances. However, it needs to be clearly understood that at each triennial revision of the government valuation they are carrying out what is called a "mass appraisal" and that in the revaluation of each district they are required to process, consider and place a value upon a very large number of very varied properties in a relatively shorttime. Time pressure For example by my count there are approximately 1 200 rateable properties in the town of Ohakune and thus because of the pressures of time upon them VNZ are, in some cases, unable to make a detailed physical inspection of individual houses and will have to rely on an external viewing and a correlation with other properties nearby, and with others which are known to have sold and can be analysed for comparability. Computer analysis also gives a range of possible values and VNZ' s final decision will usually fall within that range and give a degree of consistency, quality for quality, between the properties in your neighbourhood. At this point VNZ make a decision about the value of your particular property and you are notified accordingly. However, given the mass appraisal characteristics of the exercise it is unavoidable that it has certain "broad brush" comments,

and I believe that this is recognised and accepted by VNZ. It is inevitable that while the majority of their valuations should be about right (though exclusive of all chattels) there are some which for some reason or another will be wrong. Here, VNZ rely upon the objection procedures provided for by the Act to throw up any gross inaccuracies. You have a right to object if you are not satisfied with your valuation and your valuation notice tells you how to do it. If you do object, and I strongly recommend that you should if you believe that your valuation is incorrect within the above definitions, then you will need to give grounds for the objection and say what you believe the value should be. VNZ will then arrange to come back to your property, make a detailed inspection, and review and if they consider it to be necessary will amend their valuation. If you are still not satisfied you then have the further option of pursuing the matter before the Land Valuation Tribunal. Within the next few months the next revision of the Government Valuation for the Waimarino will be published with an effective date of 1 September 1996. It is important to you that the figures for your property are as accurate and fair as is possible, partly because they become the basis for rating and partly because they can have an impact on the perceptions of both buyers and lenders in the event that you wish to sell or refinance.