How much is a house worth? The best way to work out the value of a home is actually something you already have access to and no its the CV. Different valuation methods serve distinct purposes and some are poor at indicating the true value. This article aims to demystify these approaches and provide clarity on what really matters when assessing a home’s value.
Understanding Valuation Methods
From government valuations to automated appraisals there are so many sources of data. However, the most reliable approach hinges on researching recent market sales. It’s important to understand that Council Valuations (CVs) are not accurate indicators of market value or borrowing potential. Most financial institutions disregard them.
Are Council Valuations Important?
In short—no. CVs hold little weight in determining the actual market value of your home. While some people believe CVs offer a benchmark, the reality is they serve a different purpose.
The main function of a CV is to help councils distribute rates fairly across properties in the area. Even then, a higher CV doesn’t automatically mean higher rates—it depends on how your suburb has appreciated compared to others.
Banks don’t rely on CVs for lending decisions. In almost every case, banks ignore them entirely. CVs are based on a blanket algorithm at a particular point in time, which makes them unreliable as a measure of today’s market. Think of it like using a ruler that changes length—hardly ideal for accurate measurement.
What About Desktop Valuations?
Desktop valuations, sometimes called e-vals, are commonly used in the banking industry. These are algorithm-generated estimates based on recent comparable sales in the area. While helpful as a rough guide, no one physically inspects the property in question.
Banks rely on desktop valuations to get a general idea of a property’s worth, especially for top-ups or borrowing against equity. However, these valuations can miss important details like unique features, views, or recent renovations.
That said, desktop valuations can be relatively accurate for uniform property types—like townhouses or new builds—where many similar homes were built around the same time. For a rough estimate of what a bank might lend against your property, your banker or mortgage adviser can provide quick access to these systems.
Registered Valuations
Registered valuations are considered the most comprehensive and objective form of property valuation. They are carried out by qualified professionals who physically visit the property and assess it based on recent sales of comparable homes.
Banks may require a registered valuation when a property price unusual for its location, if the deposit is considered low(less than 20% of value) or if its a private sale.
Getting a registered valuation does come with a cost.
The Best Way to Work Out What A House Is Worth
The most reliable method for estimating a home’s market value is thorough, hands-on research. Start by reviewing actual recent sales in the area, ideally in the past three months. New Zealand sale prices are publicly available on some sites, most real estate agents have tools which can be used to query particular suburbs.
For the most current insights, attend property auctions—many are streamed online—or review recent auction results. Comparing the home you’re considering to recently sold, similar properties is key. Focus on location, number of bedrooms, property size, and other distinguishing features.
As a buyer, you’ll naturally become familiar with the differences between homes on the market. Remember, this isn’t an exact science. The goal isn’t to find a perfect number, but to buy at fair market value. If you’re holding the property long-term, minor price differences today become less significant over time.
If you’re looking to top up your mortgage or borrow against your property for another purchase, your mortgage adviser remains your best resource. They can guide you through what’s realistically achievable based on how banks interpret the property’s value.
