Relationship between council value and market value

[kanad]

How does the council determine the value (in your rate notice) of a property and is there a relationship with market value. e.g. if a property had council value of 350k in 2008 and bought for 400k and in 2010 the new council value is 400k can you assume the market value to be at least 450K now ?

Is using council value this way a good way to re-value your property like for re-finance etc.

 

[Propertunity]

A council land valuation (done by the Valuer General) is in no way, shape or form an indication of likely sale price (market value).

It is calculated very conservatively (for rates purposes), only refers to the land component, and is very often out of date by some years.

Forget about it. It is only for your local council to determine rates.

 

[Peter Parker]

How does the council determine the value (in your rate notice) of a property and is there a relationship with market value. e.g. if a property had council value of 350k in 2008 and bought for 400k and in 2010 the new council value is 400k can you assume the market value to be at least 450K now ?

Is using council value this way a good way to re-value your property like for re-finance etc.

I have heard agents say that council values are much lower than the 'worth' of a property, and for buyers not to worry too much about it.

This may be most true after several years of strong growth and council values have not kept up with the market.

But I most certainly do not believe claims that properties always sell for way above council value correct.

I won't consider them infallible, but I'd consider council valuations a 'good value' purchase price. If you can buy at or near such a price the property is probably better than average value and yield (it's renovation potential might be poor, making this approach less suitable for the renovator though).

Supposing one did little but put in offers at council valuations and only bought when the vendor came down to near that price, you'd get a lot of rejections but would also end up with some great value purchases.

If one had a policy of researching and making one offer per week over 40 weeks of the year (near council valuation) and only one in 20 of those offers were accepted, that's still 2 property purchases per year (subject to finance and cashflow) which for 95%+ of property investors is a good result.

So in short, council valuation is one piece of information that could provide guidance on whether a property is good value or not. But if I as a buyer wouldn't pay much above council valuation, it would be rash for you as a seller to rely on your property being much more than that. A more realistic approach then would be to consider the council valuation as a fair (but probably conservative) estimate of value.

I think it varies between states but Victorian council valuations give both an unimproved (ie land) and an improved (ie house and land) figure.

 

[Pa1nter]

If someone came to me and said,
I am in trouble and need to sell my land quickly,

I would definitely look at purchasing it ,but only for the unimproved land value (As long as it has no other problems,EG:Flood)

I have bought several this way.
It is also a good place to start an offer at

 

[spark]

How and where can you get the council value of a property you might be interested in?

 

[kanad]

@propertunity - I find it unbelievable that council valuation can be that low.I bought the property in late 2008 for 400k when council valuation done on Jan 2008 was 350k. Do you mean I have the house for only 50K and rest for the land ? In 2010 rate notice they had new value done on Jan 2010 as 400k.

@spiderman - I am not interested to use council value in buying decision. But rather to calculate value during re-financing my loan. Otherwise how do you convince the bank that your property value has gone up and you have equity now.

 

[Ski-bum]

Forget about it. It is only for your local council to determine rates.

And land tax, so the lower it is the better sometimes

Otherwise how do you convince the bank that your property value has gone up and you have equity now.

Your bank will conduct a formal valuation to establish how much equity you have. Some banks charge for valuations - anywhere between $200-$400.

If you do some forum searches on 'bank valuations', you'll find some interesting discussions

 

[random]

A council land valuation (done by the Valuer General) is in no way, shape or form an indication of likely sale price (market value).

It is calculated very conservatively (for rates purposes), only refers to the land component, and is very often out of date by some years.

Forget about it. It is only for your local council to determine rates.

Thanks Property , I've been wondering this myself . We just got a rate notice the other day and I tell you what , if their value is real time I've made a major boo boo , so that's a relief !

Cheers

 

[Propertunity]

@propertunity - I find it unbelievable that council valuation can be that low.

2 things:
1. It is an irrelevant figure, of no value in determining market worth - move on....
2. Ring them and ask them to increase it so you can pay more rates.

 

[Propertunity]

How and where can you get the council value of a property you might be interested in?

The rates notice or ring the council and ask.

 

[RickF]

I have just recently received/had both occur and the difference between the council val and the bank valuers val were very significant but pretty much what I had expected.
I have always believed the council val is for the purposes of determining what your rates are. This allows the council to charge higher rates to property owners with a larger or more valuable land content. If you live in a unit or flat/apartment you pay less in rates than someone with a 1/4 acre block, of course the 3 or 4 townhouses that were built on another 1/4 acre block collectively pay more in rates which is why some councils are pro developement.
I have made improvements to my PPOR over the last 5 years which the valuer recognised. The council have never been to my house and if anything have only driven past but I doubt that. They have no idea how I have increased the value of my house/property but the bank does know. The council rates reflect this.
I for one want my council valuation to stay as low as possible as it is pretty much irrelevant in regards to the real value of my property.

 

[boods99]

Over here in the land of slowness, our residential (improved)council rates are calculated on the gross rental value, rather than the unimproved land value. Although, if you have vacant land, it is calculated using the unimproved land value (usually a percentage, such as, say 5%) and then applying a cents-in-the-dollar rate to that figure.

Land tax is calculated on the unimproved land value.

Both of these values are obtained from the OSR. Both of these values are not usually in the ball park in relation to the actual market value of the property.
As others have said, it works in our favour for these figures to be as low as possible.

Boods

 

[spark]

The rates notice or ring the council and ask.

Isn't it a "private" info?
You mean I can get this information on my neighbour's house without his permission?

 

[Propertunity]

Isn't it a "private" info?
You mean I can get this information on my neighbour's house without his permission?

No. You just ring council and say that you are interested in buying a property at xx address and you want to know what the council & water rates are for the property.

 

[oneuppmanship]

In my experience, with every house bought and sold, the rates notice valuation is not even remotely close to what the property sells for.

 

[HomeBuyerStrike]

As Propertunity has alluded to, it is not in your interests to challenge or question this phenomenon. Effectively you are asking 'Hey Mr Council Man, could you please relieve me of my hard earned cash?'. It would be a different story if values were depreciating and you were overpaying your rates, but in this instance don't look a gift horse in the mouth.

 

[Sheryn]

In my experience, with every house bought and sold, the rates notice valuation is not even remotely close to what the property sells for.

Rates notices is for land only not house. Locally our valutions by the Valuer General have been reasonably spot.

Example purchased land for 140K - VG valuation 9 months later 139K.


Cheers
Sheryn

 

[Peter Parker]

In my experience, with every house bought and sold, the rates notice valuation is not even remotely close to what the property sells for.

Mine's been exactly the opposite - with purchase price close to (or even slightly below) val.

These were conventional sales of more basic properties, with no known vendor circumstances or fancy offer tactics to make them supercheap buys.

It may be because I favour the bottom end, placing most value in things like land size and a solid (ie brick) no-frills home in a convenient (but unpretentious) area in which not everyone would aspire to live.

I suspect that valuers value frills and doodads lowly - much less than what they cost to put in. In contrast, fussy buyers who care about these things more than I would might value them highly. Hence somewhat 'better' homes end up selling for much more than the valuer's assessment, but cheaper, less improved places end up selling for closer.