Hilda.
I'm Chelsea Daniels and this is the Front Page, a daily podcast presented by The New Zealand Herald. Rates have increased across the country this week, with some cities better off than others. Auckland Council has confirmed a five point eight percent average residential rates increase, the same day that
Wellington's council struck a twelve percent lift in their rates. Meanwhile, Gisbon residents face an average nine point ninety five percent rate increase, which equates to about four hundred dollars or less for eighty percent of homeowners there, and the increases have come at the same time as council valuations in Auckland dropped by nine percent. But what do lower cvs mean for your rates bill and what does it mean
in the context of the wider property market Today? On the front Page, opuh's partner's economist Ed McKnight is with us to bust some myths about valuations, rates and the current state of the housing market. Ed, we've seen a variety in rates increases around the country, which mostly all came in effect at the start of the month. What are some of the trends that you've seen this year.
Well, the most interesting thing is some areas aren't seeing massive rates increases, like place like Wanganu we are only up two point two percent. Auckland that are actually below average as well, up about five point eight percent. But some council areas have really ramped up rates. Down on the West Coast, we've seen regional rates go up over twenty five percent. My understanding is that Hastings Napier are
all up over twenty percent as well. Pretty easy to understand why, given that they've had some really big issues with weather related events recently. But even areas like Kluther District way down South and Otago they have seen massive rates increases there too.
And the rates increase that's come for Auckland is a few weeks after homeowners received their council valuations. Now what is this CV and what does it mean for your house price?
Yeah, it's real interesting. A lot of people are quite surprised that they've got their new CV. Their house value appears to drop, but they're still paying a higher rates bill. And what you've got to understand is that your house price doesn't necessarily impact the exact amount of rates that you pay. It does, but kind of in a roundabout way.
So the way that it works is that Auckland Council or any of the councils will say how much money do we need to raise this year and spoiler alert, it's more than last year, and the CV is used to say, well, how much of a share should each homeowner have to pay? Well, if your house is a bit more expensive than somebody else's house, you probably have more money, so you pay a higher share of those rates.
So even though most.
People's cvs have gone down, their house values have gone down, what really matters is, well, how much has rules changed compared to everyone else's. So if your house value didn't go down by the average of about nine percent, then you will pay a higher share of your rates of the rates in total and get an above average rates increase.
Right, So I was doing some research and I came across some common myths or assumptions online about rates and cvs. One was that because property values have reduced, your rates will reduce as well.
Is that right extically what we were just talking about.
There's another myth that councils really want house prices to go up because then they get to charge everybody more and more rates. But if your house value goes up or goes down by ten percent, that doesn't mean that the council charges you ten percent more if your house value in or charges your ten percent less because the
house value has gone down. It's all about what is the share of rates that you pay, and the cvs are just the mechanism to make sure that people who have more money and can afford more expensive houses end up paying a higher share.
Is that a bit of an old school assumption though, just because you live in a real snazzy house that you've presumably got more money to pay rates.
I think it's probably quite a simple way about going about it, because there are lots of different ways that you could decide, well, who pays more, who pays less. I think it's a pretty fair way to go about it. Personally, I live in an above average house, and so I pay and above average share. I have an above average rates bill. I kind of think that's fair. Where it does come a little bit unstuck, as if you're a retiree. So let's say you bought a house for a packet
of raspberries back in nineteen eighties. Now your house value might be way way way way more expensive. Now, that's good because you've got some more equity. But if you're a retiree, maybe your income's gone down. But there are targeted packages of support, like you can defer your rates bill. If you are a retiree and you're struggling to pay it, you can defer it and pay it once you eventually sell that house.
Right, So, raising rates or raising property valuations, it's not a council cash grab.
No, No, there is a I think you could say there's a council cash grab going on in that some areas are increasing rates by a quarter twenty five percent because they want to spend more, so they're definitely grabbing more cash. But it's not like the councils there being like how can we push up house prices? Because if we push up house prices, that naturally means that we can charge everybody more rates. It's about the percentage that each of us.
Pay the rates but will get.
It's not like because if you're values drop, it doesn't mean your rate spills go down, rate bill goes down, doesn't.
It just means it increases that are stole rate than it otherwise. Whatever.
Yeah, So pretty much, if you were If your CV foil, say fifteen percent, you're alluded to the average there was down about nine If your CV fel fifteen percent, you're probably still going to see a rate spill increase, but it might just be smaller than others. If your CV foul five percent, you're going to see a ratespell increase, and it may well be a little bit bigger than others. So really this is set as at May twenty twenty four.
It's away of allocating rates across every home in Auckland, nothing more than that.
Were you surprised by some of the revaluations.
I was surprised that some of them didn't go down more. Actually, because the most recent rates were taken in about May twenty twenty four, kind of mid last year is when the current cvs that just came out were set. Certainly in Auckland, the previous ones were set really close to the peak of the property market, which was round and June twenty twenty one. Well, since that point we've seen
property values in Auckland fall roughly about twenty percent. The fact that the average CV dropped only nine percent in Auckland, I thought, actually that's a bit less of a drop than I was expecting.
And should renters care about CVS and rates? How does it affect them?
Only to a very very small degree. If rates are increasing, that means more costs on your landlord. You will see some people say that, well, if the if landlord's costs go up, they then pass that onto the tenants. But at a market like we're in today, that doesn't really happen.
Renters rarely do hold the upper hand a bit because we've got a lot of supply on the market in terms of lots of landlords trying to find tenants, and it's a bit slower for them at the moment they're finding it is taking an extra week to get a tenant in. And because of that, even though rates are increasing in places like Auckland, you are rents tick down a little bit. So I wouldn't be too concerned at least in this market if I was a renter seeing that rates have gone up.
Right, What about if you're on the market for a house, you're looking for somewhere to buy, how do you leverage cvs in your negotiation process?
Perhaps kind of depends what you're trying to do in which side of the table you're on.
So it's something a bit cheaper.
Yeah, yeah, I'll.
May be a good example a Native mind was trying to sell their property. They looked at their CV and they thought, hmmm, we've done some renovations to this property, so the CV looks a bit low.
I know what we'll do.
We'll go to the council and we'll try and get that CV adjusted up and that will mean that we pay a little bit more rates temporarily, but that will look a bit better to the buyer because then they'll think, wow, if the CV is up here, that means we're getting a really good deal. And so one trick if you are selling your property and you've done some renovations all the market has moved up is it does cost you
the money. But if you get a registered valuation, you can go to the council and say, hey, put my CV up And even though it means that the next buyer will have to pay slightly more in rates, often that's going to help you in terms of positioning where your property is.
That sounds a bit sneaky, ed.
Is it? It's not sneaky. The CV is the CV an actual fact. Buyers and sellers should not really care too much about the cvs, because they're really out of date. Even sitting here today, the CV of my house was set twelve months ago, so that doesn't really reflect the value of what the property is today. But given that some buyers and some sellers really care about the CV and think that that's an accurate reflection of the value.
If you are a seller, if you are a buyer, then this is about how do you position how do you position this house to either get the price that you want or the sale price that you want.
Looking at house prices in general, how are things performing at the moment? I've seen reporting, including from Opus Partners, on a two tier recovery happening around New Zealand. Can you explain that to us?
We are seeing some parts of the country pretty much flat or still going down. Parts of Wellington over the last twelve months have seen property prices fall four five in some cases up to nine percent. So we're still seeing, especially Wellingtonian's doing it really tough. Compare that to a place like in the cargol Over the last twelve months, house prices up four percent since the bottom of the
market about two years ago. In the Cargo City, house prices are up around about fifteen percent since the bottom of the market. Dunedin's up eight percent, Queenstown's up eleven percent, christ Church is up seven percent. So if you're sitting here in Auckland's like i am, you're probably seeing a very very flat property market.
But not everywhere in the.
Country is flat, and so we are in this period where you're going to get a lot of conflicting information about our house prices going up, are they going down, are they staying the same. The other thing that's going to contribute to that is that while we're in this flat market, there are three different data providers that the media will quote qv core Logic, which is ow called Totality,
and the Real Estate Institute of New Zealand. Because all of these organizations release different measures, one data company might be saying house prices are going up while another one is saying they're going down. And we just saw that last month where Cotality formerly core Logic, was saying yep, house prices have ticked up zero point two percent over the last month, and just a couple of weeks before that, Rhymes came out and said house prices are down zero point six percent.
Right, So when it comes to reading into those valuations and those kind of that criteria critiques. We've got to keep it kind of like treat it like a political poll maybe, so pick and choose things and really look into the data really to see what we can get from it, rather than just taking everything verbatim.
Do you know, well, that's a really good analogy.
Never heard somebody explain it that way, But that's exactly how you should think about it. Just like political polls are up or down, they are just one reading. You probably do want to look at all of the different data sources together. The truth of the matter is the property market is pretty flat. We are seeing that and across a range of different measures. So I'll give you another example. It's not just house prices that are pretty flat.
New build dwelling consents have basically flattened out and have for the last year to eighteen months. We're now roughly issuing the same number of new dwelling consents that we were back in twenty nineteen. So during the big COVID boom, we saw this massive ramp up in construction that's now come back and is settled down around that twenty nineteen
level housing stocks. Another one to look at. We saw this massive ramp up of lots and lots and lots of people listing their properties for sale over the last year to eighteen months. That has now flattened out in terms of the amount of housing stock. It's landed out at a high level, but there's just a bit more stability going on in the market at that moment.
There is an objection process for the CVS. If you believe that the CV is incorrect for your property. Now reasons that you might want to do this. The most likely reason would be that the CV is significantly higher than you would expect, which means you'd pay more rates than you would expect, so you might want to object
to get the CV lower. The other reason is that some parties in the market, and we wouldn't really agree with this, but some parties do use the CV as like a benchmark if they're selling their property, and they might want to get it higher for that reason. Although we would argue that better quality information means that the cvs are less important for that purpose these days, but put that aside, you might want to object to it.
Right when I moved to New Zealand, one of the things I always heard about was the housing cre crisis that was ten years ago. Granted, but it does feel like we aren't talking about this crisis. We're not in crisis mode these days, a thing stabilizing in terms of those new builds and in terms of the housing market in a whole.
Yeah, you did right.
We've moved on to about seventy five other crisis we're found. Yeah, and it's nice to see it. Australian, come the other way, come over the side of the tasmhen. It's great to have you here, Chelsey.
We have of us here.
We are seeing that stability now in terms of the level of housing stock flatted out, the level of new build dwelling consents flatten out, house prices flattening out. It's only when we really start to see a lot of inflation house prices skyrocket that we start to really call it a crisis. I do think in five, ten, fifteen years time there will be another cycle where it comes back and we're talking about a housing crisis again. But at the moment, because a lot of things are flattening
out and stabilizing, our attention is elsewhere. It is a great time to be a home buyer right now. There is a a lot of housing stock on the market, more than we've had for the last about ten years. While interest rates are coming down and so there are there are more buyers stepping forward and saying, yes, we
are going to purchase. But that's not translating into higher house prices, and that's not translating into fewer listings property listings available on the likes of trade me or one roof for real Estate dot courd Denz.
So finally, ed overall, how do you rate the health of the housing market?
Oh, on a scale of what Chelsea?
Oh, go on, I haven't thought that far ahead. Give it like out of ten stars or something.
I would give it like a four or a five.
It's not sick anymore in terms of house prices falling massively and homeowner has been really worried about that. Across most of the country, it's pretty stable across again, those number of listings online, properties selling again, it's all pretty safe.
I'd give it four or five.
But having said that, houses are still expensive, right, so if you were a first home buyer look at the market, you'd say absolutely not, it's one out of ten because I'm still struggling to purchase the House.
Thanks for joining us, ed Thanks Chelsea.
That's it for this episode of the Front Page. You can read more about today's stories and extensive news coverage at enzadherld dot co dot nz. The Front Page is produced by Ethan Sills and Richard Martin, who is also a sound engineer.
I'm Chelsea Daniels.
Subscribe to the Front Page on iHeartRadio or wherever you get your podcasts, and tune in on Monday for another look behind the headlines.