The recent release of Auckland Council’s 2017 CV (Capital Valuation) figures has created interest amongst many home owners who have seen a change in their property CV. Whilst many Auckland home owners are likely to have seen an increase in their property CV, we asked Vince Clark, ASB’s Head of Home Lending whether this will continue, and his view on property values across New Zealand.
What is a CV?
CVs are an estimated value of the property at the valuation date based on a range of factors like recent sales, location, size, property type and improvements made. Every property in NZ has a CV (sometimes referred to under their old name GVs – Government Valuation). The CV helps Council work out everyone’s share of rates to be paid for the next three years in return for services provided to the property and community.
Importantly, CVs aren’t generally the same as a market value of a property. Councils in New Zealand conduct a “general valuation” typically every three years to review CV figures. Under a general valuation, no physical property inspection is involved so this mass appraisal style approach uses (among other things) recent sales for similar properties in the area to calculate the CV figure. Given the nature and frequency of general valuations, a market valuation determined (for example) by a registered valuer will usually be more accurate.
What are CVs used for?
First and foremost CVs are used to calculate your share of rates in return for the services provided by the Council to your property and your local community. The CV figure is one of the property valuation types ASB may be able to use to calculate how much we can lend someone wanting to borrow money against their home. Understanding how much “equity” you have in the property is important – equity is the difference between the value of the property and how much you owe. As a result, your equity can go up or down due to a change in the amount borrowed and/or a change in the value in property.
However, the single most important factor of how much we can lend you is based on how much you can afford. As a responsible lender, it is essential to us that you are not overburdened with debt and can afford to maintain your mortgage payments now and in the future.
What can I do with my CV?
If your CV increases, you might be able to borrow more against the equity created in the property. For example, this might take the form of a top-up on your home loan for property renovations or the purchase of a new car. ASB may be able to use the CV figure, or we may request a different type of valuation (for example, one conducted by a registered valuer involving an on-site inspection) to confirm the value of the property. Again, any new application for borrowing will be based on your ability to service the additional loan amount.
Where are property values headed?
Many home owners across New Zealand have seen an increase in their property value over the last few years. According to the Core Logic NZ QV Monthly House Price Index, average NZ property values have increased 4% in the 12 months to October 2017. While prices continue to rise modestly in Wellington and Dunedin, Auckland values have fallen by 0.6%, in the 12 months to October 2017.
According to ASB Economists, growth in average property values across NZ are expected to remain fairly flat over the next 12 months as the new Labour/NZ First government introduces various property-focused policies. However, over the medium term, population and income growth will contribute to modest price growth, particularly in areas where shortfalls of housing supply remain.
Where can I get more information?
Talk to us. Tell us what you would like to do and how much you’d like to borrow. Each situation is different and we are happy to chat to customers about their options. You can contact our lending specialists online here or give us a call on 0800 100 600. If you have an ASB home loan, ASB Home Central allows you to manage your home loan with FastNet Classic internet banking and the ASB Mobile banking app.