Clarifying Capital Valuations – Part 1 & Part 2


Buyers and vendors often have a confused understanding of capital valuations, sometimes abbreviated to CV. The confusion surrounds not only what a CV is but what it means.

A capital valuation is carried out by a largely independent organization to provide property values for rating purposes for a local authority.  For some time in Dunedin, these valuations have been done every three years by Quotable Value (QV) for the Dunedin City Council. The last was in July 2013. Every property owner receives notification of their CV later in the year, usually in October or November.

For background, QV was originally formed as a Crown-owned company in 1998 out of the former government department, Valuation New Zealand, whose main role was establishing rating values for local authorities. Through a law change, local authorities were able to contract out valuation services, so QV, which became a State-owned enterprise in 2005, now competes to provide this service. This helps explain why some people still refer to CVs as “GVs” (an abbreviation used for Government Value).

How does QV determine a property’s CV? Quotable Value does not physically visit all city properties. It arrives at a CV using historical data, any updated information on the property held by the local authority or itself and by using a computer model to adjust values up or down for each value period according to recent relevant real estate sales statistics. The CV is the value assessed at a specific time. In Dunedin, this has been July every three years.

The main point to be made here is that a CV is not a market value. The two are quite separate though often confused. A market value is often defined as “the price paid by a well-informed buyer to a willing seller”.  CVs and market values can vary widely. (More on this in part 2 of this article).

Another related fact to bear in mind here is that CVs do not include a property’s chattels, that is, items that are usually included with a property sale, such as oven, floor coverings, light fittings, drapes and appliances. The value of these can often add up to many thousands of dollars.

As well as being clear about what a CV means, it is worth being careful when using abbreviations. I often hear buyers referring to a property’s “RV”.  Sometimes this abbreviation is used to refer to “ratable value”, which is more properly called the capital valuation or CV. But others use “RV” to mean “registered valuation”, which again is quite a different thing.

A registered valuation is a value determined by a professional valuer assessing a property’s fair market value, that is what the property is likely to sell for on the current market. It is not unknown for valuers’ opinions to vary, but usually by not more than 10%. Incidentally, QV carries out registered valuations as well.  See its web site

And just like CVs, registered valuations can become dated, depending on property markets. Generally, real estate professionals would advise that a registered valuation more than six months old should not be relied on. Banks also insist on recent registered valuations.  (Part 2 to follow)….


Now that we have clarified what a capital valuation is (see part 1 of this series), how do CVs affect market prices?

The first thing to note is that market prices paid for residential property in Dunedin are below, at and above capital valuations. A variety of factors come into play. So how do buyers work out what a property is worth? Many, unfairly, use the CV as a guide. The inaccuracy of this can be illustrated by the following scenario:

Take two similar properties, A and B, right beside each other. Both are 50 years old, have three bedrooms and a single garage.  Property A has not had any maintenance carried out since the day it was built. The roof needs replaced, the interior is tired and needs updating.  It has a CV of $250,000. Property B is identical to Property A in all respects except that it has had a recent new kitchen, new carpet, had a repaint, a new roof and has had recent landscaping and garden plantings. It will also have a CV of $250,000 because CVs are calculated using computer models. None of the improvements to Property B need to have been reported to the local authority. Quotable Value cannot physically visit every property before it revises CVs.  It’s obvious, though, that these two properties will have quite different market values, one likely below its CV and the other above.

Generally in Dunedin, if a property has not been well maintained, let alone updated, it is unlikely to fetch above its capital (or ratable) value. Buyers prepared to make an offer will often factor in the cost of deferred maintenance and repairs when they work out what the property is worth to them.  Many subtract these costs, plus more sometimes, from the CV in calculating their offer. There are strong arguments against this simple calculation method – including that CVs are not market value, are usually not current, do not include a property’s chattels – but the fact buyers often work out offer prices this way illustrates how important it is to have a CV that is at least close to market value and to prepare a property well for market.

Most property owners do not take advantage of the month or so period after CVs are issued to appeal the value they are given. The majority are quite happy to have a low CV because it is used as part of factoring their rates bill and home-owners believe they will save a few dollars. But they can easily lose many thousands of dollars if their CV is low when they go to market.  No matter how well presented a property is, buyers are likely to be reluctant to offer significantly above a low CV. Just as significantly, an overly high CV, if promoted during marketing as market value, can result in buyers turning away.

That’s why it’s important to seek a revised CV from Quotable Value before marketing if you suspect yours is inaccurate.  The cost is around $200 and the process is usually completed within a few weeks. If in any doubt, ask a trusted real estate consultant to provide a market value for your home and to guide you on how to appeal a CV.  I am always available to provide this service at no cost.

for Market Intelligence