According to Wellington City Council, new Rateable Values are set to be released mid November 2015. With that in mind I thought it would be an excellent time to examine the relevance of current RV’s. We are going to look at average sale prices compared to RV for each main suburb and tell you exactly what is happening out there.

It is fair to say the current RV’s in our area are mostly well out of date. You will see below most suburbs are now selling more than 10% above RV and the numbers have risen markedly over the past 12 months. I have been saying to my clients that in my belief prices have risen by at least 5% over the last 6-9 months which is backed up by the numbers below. It’s not quite Auckland’s capital growth rate but it is nice to see the Wellington market slowly improving after years of treading water.

There are 2 main contributors to the price increases we have seen this year:

1.Historically low interest rates.

This makes money cheaper to borrow, which makes having a mortgage more affordable, encouraging more buyers to get into the market. It also means more and more people who already own a 3 bedroom home in Newlands or Johnsonville are deciding to keep their property as a rental when they move to a bigger home. This then reduces the number of properties coming on the market for first home buyers, forcing them to fight over fewer properties available for sale (what a vicious cycle!). As a result we are often seeing 30 – 40 groups visiting half hour open homes for well presented 3 & 4 bedroom properties

2. Kiwisaver deposits. 

Many buyers in our current market simply would not be in a position to buy a home without kiwisaver, which often makes up the majority of their deposit. For young couples who smartly chose to enrol a few years ago they will now have a hefty amount saved up between 2 accounts. They can either spend the money now by buying a home, or wait until they are 65 to access their hard earned savings. If you know anything about Generation X & Y you know we get the now-nows so it’s no surprise this kiwisaver money is burning a hole in their pockets! When you combine this with the homestart grant now available which can give you another $5k each if you buy under $450k, the incentives are there to bring more buyers into the market.

Now, before you take the averages below as being perfect it’s important to note that we are seeing huge variance from house to house, with some properties selling for $5k above RV and some selling $150k above RV. Confusing? Well you have to remember that RV’s are usually just a computer generated number based on floor area, land size and past sale price so while they are useful info, you can’t read too much into them. For example, in the last 9 years I have sold only 2 properties for their RV.

Lets look at some stats!

Using our database software we can calculate price to RV ratio’s based on REINZ sales stats. So we can tell you that for the last 30 sales in each area…

Average price compared to RV:

  • Johnsonville:  +12.7% (ie. houses are selling on average 12.7% above RV, this number is up 6.6% in the last 12 months) 
  • Newlands:  +12.1% (up 3.8%)
  • Paparangi:  +15.8% (up 6.3%)
  • Churton Park:  +16.4% (up 10.8%)

It is important to remember that the individual sales vary greatly with some properties still occasionally selling below RV and some selling for 30% or more above. These figures can give you an idea of the current market trend though.

2 important questions to ask when looking at any RV…

1.When was the RV done? Has it been re-inspected?
Most RV’s are generated without anyone ever the visiting the property so it’s a credit to the system used that they can even be slightly relevant at all! Owners can pay $250 to have their RV ‘re-evaluated’ at any time to take into account renovation work and make it more in line with RV’s for similar homes nearby. When you visit a property it is a good idea to ask if this has been done. If it hasn’t then the current RV is unlikely to reflect any work these owners, or even previous owners have undertaken. The last City-wide review of RV’s was completed in 2012 (note: this didn’t involve physical inspections of each property).

2.When was the property last sold?
I find the relevance of an RV will depend on the sales history of the property. This is not a hard and fast rule but usually if a property has been sold in the last 3 – 7 years the RV will be closer to market value (RV’s were last reviewed in 2012). This may be because RV’s often seemed to be realigned with recent sale prices. If a property hasn’t sold for 10 / 20 / 30 years the RV can often be very very low, even if the home is dated or run down.

In Conclusion…

Rather than looking at only the RV, it is always best to shop by comparison. If you spend time doing this when buying a laptop you should definitely do it when buying a house. The key here is finding out what properties you have seen have actually sold for rather than basing your idea of value on an RV, or what an agent might have told you at an open home. Also, when visiting any property for sale you should expect the agent there to be able to provide you with a report showing recent sales that may be useful as comparisons for the property you are viewing. Something like this…Example CMA.

Always consider what else you can buy for your money!

We hope this info can help you make a more informed decision when offering on your next home.

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The market is getting busier and busier with more properties coming on the market each week. The annual Spring rush is in full swing now. Don’t be discouraged if you have been unlucky this Winter, your dream home might be just around the corner. Scroll down for info on current properties available for sale and have a wonderful weekend!

Best wishes,

Andrew Duncan 

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THOUGHT OF THE WEEK:
“For every minute you are angry you lose sixty seconds of happiness” ~ Ralph Waldo Emerson
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