What is the difference between the rateable value and market value of a home?
In the quest to purchase your first home you’ll probably notice that some properties are advertised using different values, all of which can differ quite drastically.
While your bank probably uses its own appraisal methods to calculate your home loan rates in NZ, it’s still a good idea to know what the various terms means. Let’s take a look at the differences between two of the most common values: rateable value and market value.
What is a property’s rateable value?
A home’s rateable value (sometimes referred to as a government value or, in Auckland, a capital value (CV)) is essentially how much the government thinks the property is worth, and is used to determine rates.
It is calculated based on three key factors:
- Capital value
- Land value
- Value of improvements
It’s important to note that rateable values are generated automatically via electronic analysis, a process that only takes place every three years. Consequently, the rateable value can be considerably higher or lower (sometimes by as much as 50 percent!) than a property’s true worth, and is not a good metric for assessing how much a home will sell for.
What is a property’s market value?
Market value is simply the amount of money that a prospective buyer are willing to pay for a house. Property valuers take a bunch of things into consideration when working out this value, including:
- Current economic climate
- Property sales statistics
- Interest rates
- Potential use of the land
To work out the most accurate market value of a property, you may want to enlist the services of a professional, though it is possible to do your own research and get a pretty good idea of what a home is worth. This makes it easier to start looking for the best mortgage and see if you can afford the repayments.
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The PocketWise Team