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Jury's out on whether RVs help or hinderLast updated 05:00 29/06/2013

If you're looking to buy or sell a house, you won't be able to avoid rateable values. Many houses are nowlisted with their RV, and real estate firms take out full-page ads trumpeting their success in selling above it.

But according to one senior Wellington real estate figure, RV is essentially a rort. He says any agent whoemphasises the RV of a property insults the intelligence of clients, and most agents know RVs to be worthlesseven though they use them anyway.

The RV is a value put on a house by councils to work out how much the owners should pay in rates. But it isnow commonly seen as an official assessment of the market value of the house.

Critics have said RV does not give a true indication of value because it is assessed only once every threeyears, is arbitrary and computer-generated, allows agents to estimate prices without properly understandingthe local market, and leads to more properties being advertised without a price.

Valuer Nigel Lockwood said the only thing reliable about RVs in Wellington was their unreliability. "I always tellclients the best thing they can do is ignore them. If they end up being around where I advise the value is, thatis basically pure luck and an exception."

Measuring capital value in Wellington had been a big problem since 1987, when the council shifted fromevaluating rates on land value alone, he said.

"They used to have a team of 20-30 valuers in the council. Now they have a very small team with very fewvaluers . . . they only inspect when improvements are done or when there is a sale."

Valuers say the figures are generated by computer and do not take into account individual housecircumstances.

Colliers valuer Mike Horsley said very few of the properties rated under RV had been inspected. "All that

piece of paper does is set the rates. I might say the figure is not worth the paper it is printed on."

Buyers and sellers would be better off to do their own research into recent sales in an area and liaise withtheir agent rather than focus on the RV, he said.

"Agents get up-to-the-minute records through Reinz and their own company's transactions. Once you have alocation you are interested in, start attending open homes and get a list of the most recent sales . . . you'llvery quickly form a reasonably intelligent view of where the prices are."

There is a degree of patch protection going on here. If use of RV as a valuation tool becomes widespread,valuers will be out of a job.

Bayleys Residential agent Steve Chapman said he often used RV in his sales operation.

"I think it's very useful. It's what a lot of people use . . . it gives them an idea of what the house might beworth."

He encouraged vendors to have their properties revalued because a higher RV almost always meant a higher

sale price.

Lower Hutt Ray White principal Elliot Kemeys said his agents publicised RVs because the public placedimportance on them.

"It's the first question out of everyone's mouth. It does have a bearing on sales price . . . we sell a lot ofproperty above RV, and a lot below RV as well."

Remax Leaders manager Peter Scott said his opinion of RV fluctuated. "It doesn't give a true indication ofcurrent market trends. [But] a lot of buyers use it as a rule of thumb."

When buyers became more experienced in the market, they realised RVs were not relevant, he said.

New Zealand practice is unusual compared with other countries. In Australia, rates valuation systems vary by

state. In New South Wales, they are based on land value alone, calculated every three years. WesternAustralia operates off rental valuations collected every three years.

In Britain, property owners are charged council tax based on the value of their property when the system was

introduced in 1991. The tax band of a house rarely features in real estate discussions.

Quotable Value, which does the rating valuations for councils, does not claim it reflects the market price. Itcalculates RV using a technique called "mass appraisal".

Marketing manager Justin Snarski said it was common practice around the world. "Rating valuers considerrelevant property sales from your area around the time of the valuation. A market trend is established andapplied to similar properties."

A revaluation gave a good snapshot of the market at the time it was done, he said. "Values can vary ifcomparing the market value now to when the rating value was determined."

Despite the criticisms and drawbacks, Mr Scott and other agents think things will remain the way they are.

"There will always be a need for [RVs]. I don't think it will ever go out of existence."

- © Fairfax NZ News