Speaker 1: Hilda.
Speaker 2: I'm Chelsea Daniels and this is the Front Page, a
Speaker 2: daily podcast presented by The New Zealand Herald. Rates have
Speaker 2: increased across the country this week, with some cities better
Speaker 2: off than others. Auckland Council has confirmed a five point
Speaker 2: eight percent average residential rates increase, the same day that
Speaker 2: Wellington's council struck a twelve percent lift in their rates. Meanwhile,
Speaker 2: Gisbon residents face an average nine point ninety five percent
Speaker 2: rate increase, which equates to about four hundred dollars or
Speaker 2: less for eighty percent of homeowners there, and the increases
Speaker 2: have come at the same time as council valuations in
Speaker 2: Auckland dropped by nine percent. But what do lower cvs
Speaker 2: mean for your rates bill and what does it mean
Speaker 2: in the context of the wider property market Today? On
Speaker 2: the front Page, opuh's partner's economist Ed McKnight is with
Speaker 2: us to bust some myths about valuations, rates and the
Speaker 2: current state of the housing market. Ed, we've seen a
Speaker 2: variety in rates increases around the country, which mostly all
Speaker 2: came in effect at the start of the month. What
Speaker 2: are some of the trends that you've seen this year.
Speaker 1: Well, the most interesting thing is some areas aren't seeing
Speaker 1: massive rates increases, like place like Wanganu we are only
Speaker 1: up two point two percent. Auckland that are actually below
Speaker 1: average as well, up about five point eight percent. But
Speaker 1: some council areas have really ramped up rates. Down on
Speaker 1: the West Coast, we've seen regional rates go up over
Speaker 1: twenty five percent. My understanding is that Hastings Napier are
Speaker 1: all up over twenty percent as well. Pretty easy to
Speaker 1: understand why, given that they've had some really big issues
Speaker 1: with weather related events recently. But even areas like Kluther
Speaker 1: District way down South and Otago they have seen massive
Speaker 1: rates increases there too.
Speaker 2: And the rates increase that's come for Auckland is a
Speaker 2: few weeks after homeowners received their council valuations. Now what
Speaker 2: is this CV and what does it mean for your
Speaker 2: house price?
Speaker 1: Yeah, it's real interesting. A lot of people are quite
Speaker 1: surprised that they've got their new CV. Their house value
Speaker 1: appears to drop, but they're still paying a higher rates bill.
Speaker 1: And what you've got to understand is that your house
Speaker 1: price doesn't necessarily impact the exact amount of rates that
Speaker 1: you pay. It does, but kind of in a roundabout way.
Speaker 1: So the way that it works is that Auckland Council
Speaker 1: or any of the councils will say how much money
Speaker 1: do we need to raise this year and spoiler alert,
Speaker 1: it's more than last year, and the CV is used
Speaker 1: to say, well, how much of a share should each
Speaker 1: homeowner have to pay? Well, if your house is a
Speaker 1: bit more expensive than somebody else's house, you probably have
Speaker 1: more money, so you pay a higher share of those rates.
Speaker 3: So even though most.
Speaker 1: People's cvs have gone down, their house values have gone down,
Speaker 1: what really matters is, well, how much has rules changed
Speaker 1: compared to everyone else's. So if your house value didn't
Speaker 1: go down by the average of about nine percent, then
Speaker 1: you will pay a higher share of your rates of
Speaker 1: the rates in total and get an above average rates increase.
Speaker 2: Right, So I was doing some research and I came
Speaker 2: across some common myths or assumptions online about rates and cvs.
Speaker 2: One was that because property values have reduced, your rates
Speaker 2: will reduce as well.
Speaker 3: Is that right extically what we were just talking about.
Speaker 1: There's another myth that councils really want house prices to
Speaker 1: go up because then they get to charge everybody more
Speaker 1: and more rates. But if your house value goes up
Speaker 1: or goes down by ten percent, that doesn't mean that
Speaker 1: the council charges you ten percent more if your house
Speaker 1: value in or charges your ten percent less because the
Speaker 1: house value has gone down. It's all about what is
Speaker 1: the share of rates that you pay, and the cvs
Speaker 1: are just the mechanism to make sure that people who
Speaker 1: have more money and can afford more expensive houses end
Speaker 1: up paying a higher share.
Speaker 2: Is that a bit of an old school assumption though,
Speaker 2: just because you live in a real snazzy house that
Speaker 2: you've presumably got more money to pay rates.
Speaker 1: I think it's probably quite a simple way about going
Speaker 1: about it, because there are lots of different ways that
Speaker 1: you could decide, well, who pays more, who pays less.
Speaker 1: I think it's a pretty fair way to go about it. Personally,
Speaker 1: I live in an above average house, and so I
Speaker 1: pay and above average share. I have an above average
Speaker 1: rates bill. I kind of think that's fair. Where it
Speaker 1: does come a little bit unstuck, as if you're a retiree.
Speaker 1: So let's say you bought a house for a packet
Speaker 1: of raspberries back in nineteen eighties. Now your house value
Speaker 1: might be way way way way more expensive. Now, that's
Speaker 1: good because you've got some more equity. But if you're
Speaker 1: a retiree, maybe your income's gone down. But there are
Speaker 1: targeted packages of support, like you can defer your rates bill.
Speaker 1: If you are a retiree and you're struggling to pay it,
Speaker 1: you can defer it and pay it once you eventually
Speaker 1: sell that house.
Speaker 2: Right, So, raising rates or raising property valuations, it's not
Speaker 2: a council cash grab.
Speaker 1: No, No, there is a I think you could say
Speaker 1: there's a council cash grab going on in that some
Speaker 1: areas are increasing rates by a quarter twenty five percent
Speaker 1: because they want to spend more, so they're definitely grabbing
Speaker 1: more cash. But it's not like the councils there being
Speaker 1: like how can we push up house prices? Because if
Speaker 1: we push up house prices, that naturally means that we
Speaker 1: can charge everybody more rates. It's about the percentage that
Speaker 1: each of us.
Speaker 3: Pay the rates but will get.
Speaker 1: It's not like because if you're values drop, it doesn't
Speaker 1: mean your rate spills go down, rate bill goes down, doesn't.
Speaker 3: It just means it increases that are stole rate than
Speaker 3: it otherwise. Whatever.
Speaker 4: Yeah, So pretty much, if you were If your CV foil,
Speaker 4: say fifteen percent, you're alluded to the average there was
Speaker 4: down about nine If your CV fel fifteen percent, you're
Speaker 4: probably still going to see a rate spill increase, but
Speaker 4: it might just be smaller than others. If your CV
Speaker 4: foul five percent, you're going to see a ratespell increase,
Speaker 4: and it may well be a little bit bigger than others.
Speaker 4: So really this is set as at May twenty twenty four.
Speaker 4: It's away of allocating rates across every home in Auckland,
Speaker 4: nothing more than that.
Speaker 2: Were you surprised by some of the revaluations.
Speaker 1: I was surprised that some of them didn't go down more. Actually,
Speaker 1: because the most recent rates were taken in about May
Speaker 1: twenty twenty four, kind of mid last year is when
Speaker 1: the current cvs that just came out were set. Certainly
Speaker 1: in Auckland, the previous ones were set really close to
Speaker 1: the peak of the property market, which was round and
Speaker 1: June twenty twenty one. Well, since that point we've seen
Speaker 1: property values in Auckland fall roughly about twenty percent. The
Speaker 1: fact that the average CV dropped only nine percent in Auckland,
Speaker 1: I thought, actually that's a bit less of a drop
Speaker 1: than I was expecting.
Speaker 2: And should renters care about CVS and rates? How does
Speaker 2: it affect them?
Speaker 1: Only to a very very small degree. If rates are increasing,
Speaker 1: that means more costs on your landlord. You will see
Speaker 1: some people say that, well, if the if landlord's costs
Speaker 1: go up, they then pass that onto the tenants. But
Speaker 1: at a market like we're in today, that doesn't really happen.
Speaker 1: Renters rarely do hold the upper hand a bit because
Speaker 1: we've got a lot of supply on the market in
Speaker 1: terms of lots of landlords trying to find tenants, and
Speaker 1: it's a bit slower for them at the moment they're
Speaker 1: finding it is taking an extra week to get a
Speaker 1: tenant in. And because of that, even though rates are
Speaker 1: increasing in places like Auckland, you are rents tick down
Speaker 1: a little bit. So I wouldn't be too concerned at
Speaker 1: least in this market if I was a renter seeing
Speaker 1: that rates have gone up.
Speaker 2: Right, What about if you're on the market for a house,
Speaker 2: you're looking for somewhere to buy, how do you leverage
Speaker 2: cvs in your negotiation process?
Speaker 1: Perhaps kind of depends what you're trying to do in
Speaker 1: which side of the table you're on.
Speaker 2: So it's something a bit cheaper.
Speaker 3: Yeah, yeah, I'll.
Speaker 1: May be a good example a Native mind was trying
Speaker 1: to sell their property. They looked at their CV and
Speaker 1: they thought, hmmm, we've done some renovations to this property,
Speaker 1: so the CV looks a bit low.
Speaker 3: I know what we'll do.
Speaker 1: We'll go to the council and we'll try and get
Speaker 1: that CV adjusted up and that will mean that we
Speaker 1: pay a little bit more rates temporarily, but that will
Speaker 1: look a bit better to the buyer because then they'll think, wow,
Speaker 1: if the CV is up here, that means we're getting
Speaker 1: a really good deal. And so one trick if you
Speaker 1: are selling your property and you've done some renovations all
Speaker 1: the market has moved up is it does cost you
Speaker 1: the money. But if you get a registered valuation, you
Speaker 1: can go to the council and say, hey, put my
Speaker 1: CV up And even though it means that the next
Speaker 1: buyer will have to pay slightly more in rates, often
Speaker 1: that's going to help you in terms of positioning where
Speaker 1: your property is.
Speaker 3: That sounds a bit sneaky, ed.
Speaker 1: Is it? It's not sneaky. The CV is the CV
Speaker 1: an actual fact. Buyers and sellers should not really care
Speaker 1: too much about the cvs, because they're really out of date.
Speaker 1: Even sitting here today, the CV of my house was
Speaker 1: set twelve months ago, so that doesn't really reflect the
Speaker 1: value of what the property is today. But given that
Speaker 1: some buyers and some sellers really care about the CV
Speaker 1: and think that that's an accurate reflection of the value.
Speaker 1: If you are a seller, if you are a buyer,
Speaker 1: then this is about how do you position how do
Speaker 1: you position this house to either get the price that
Speaker 1: you want or the sale price that you want.
Speaker 2: Looking at house prices in general, how are things performing
Speaker 2: at the moment? I've seen reporting, including from Opus Partners,
Speaker 2: on a two tier recovery happening around New Zealand. Can
Speaker 2: you explain that to us?
Speaker 1: We are seeing some parts of the country pretty much
Speaker 1: flat or still going down. Parts of Wellington over the
Speaker 1: last twelve months have seen property prices fall four five
Speaker 1: in some cases up to nine percent. So we're still seeing,
Speaker 1: especially Wellingtonian's doing it really tough. Compare that to a
Speaker 1: place like in the cargol Over the last twelve months,
Speaker 1: house prices up four percent since the bottom of the
Speaker 1: market about two years ago. In the Cargo City, house
Speaker 1: prices are up around about fifteen percent since the bottom
Speaker 1: of the market. Dunedin's up eight percent, Queenstown's up eleven percent,
Speaker 1: christ Church is up seven percent. So if you're sitting
Speaker 1: here in Auckland's like i am, you're probably seeing a
Speaker 1: very very flat property market.
Speaker 3: But not everywhere in the.
Speaker 1: Country is flat, and so we are in this period
Speaker 1: where you're going to get a lot of conflicting information
Speaker 1: about our house prices going up, are they going down,
Speaker 1: are they staying the same. The other thing that's going
Speaker 1: to contribute to that is that while we're in this
Speaker 1: flat market, there are three different data providers that the
Speaker 1: media will quote qv core Logic, which is ow called Totality,
Speaker 1: and the Real Estate Institute of New Zealand. Because all
Speaker 1: of these organizations release different measures, one data company might
Speaker 1: be saying house prices are going up while another one
Speaker 1: is saying they're going down. And we just saw that
Speaker 1: last month where Cotality formerly core Logic, was saying yep,
Speaker 1: house prices have ticked up zero point two percent over
Speaker 1: the last month, and just a couple of weeks before that,
Speaker 1: Rhymes came out and said house prices are down zero
Speaker 1: point six percent.
Speaker 2: Right, So when it comes to reading into those valuations
Speaker 2: and those kind of that criteria critiques. We've got to
Speaker 2: keep it kind of like treat it like a political
Speaker 2: poll maybe, so pick and choose things and really look
Speaker 2: into the data really to see what we can get
Speaker 2: from it, rather than just taking everything verbatim.
Speaker 3: Do you know, well, that's a really good analogy.
Speaker 1: Never heard somebody explain it that way, But that's exactly
Speaker 1: how you should think about it. Just like political polls
Speaker 1: are up or down, they are just one reading. You
Speaker 1: probably do want to look at all of the different
Speaker 1: data sources together. The truth of the matter is the
Speaker 1: property market is pretty flat. We are seeing that and
Speaker 1: across a range of different measures. So I'll give you
Speaker 1: another example. It's not just house prices that are pretty flat.
Speaker 1: New build dwelling consents have basically flattened out and have
Speaker 1: for the last year to eighteen months. We're now roughly
Speaker 1: issuing the same number of new dwelling consents that we
Speaker 1: were back in twenty nineteen. So during the big COVID boom,
Speaker 1: we saw this massive ramp up in construction that's now
Speaker 1: come back and is settled down around that twenty nineteen
Speaker 1: level housing stocks. Another one to look at. We saw
Speaker 1: this massive ramp up of lots and lots and lots
Speaker 1: of people listing their properties for sale over the last
Speaker 1: year to eighteen months. That has now flattened out in
Speaker 1: terms of the amount of housing stock. It's landed out
Speaker 1: at a high level, but there's just a bit more
Speaker 1: stability going on in the market at that moment.
Speaker 5: There is an objection process for the CVS. If you
Speaker 5: believe that the CV is incorrect for your property. Now
Speaker 5: reasons that you might want to do this. The most
Speaker 5: likely reason would be that the CV is significantly higher
Speaker 5: than you would expect, which means you'd pay more rates
Speaker 5: than you would expect, so you might want to object
Speaker 5: to get the CV lower. The other reason is that
Speaker 5: some parties in the market, and we wouldn't really agree
Speaker 5: with this, but some parties do use the CV as
Speaker 5: like a benchmark if they're selling their property, and they
Speaker 5: might want to get it higher for that reason. Although
Speaker 5: we would argue that better quality information means that the
Speaker 5: cvs are less important for that purpose these days, but
Speaker 5: put that aside, you might want to object to it.
Speaker 2: Right when I moved to New Zealand, one of the
Speaker 2: things I always heard about was the housing cre crisis
Speaker 2: that was ten years ago. Granted, but it does feel
Speaker 2: like we aren't talking about this crisis. We're not in
Speaker 2: crisis mode these days, a thing stabilizing in terms of
Speaker 2: those new builds and in terms of the housing market
Speaker 2: in a whole.
Speaker 3: Yeah, you did right.
Speaker 1: We've moved on to about seventy five other crisis we're found. Yeah,
Speaker 1: and it's nice to see it. Australian, come the other way,
Speaker 1: come over the side of the tasmhen. It's great to
Speaker 1: have you here, Chelsey.
Speaker 2: We have of us here.
Speaker 1: We are seeing that stability now in terms of the
Speaker 1: level of housing stock flatted out, the level of new
Speaker 1: build dwelling consents flatten out, house prices flattening out. It's
Speaker 1: only when we really start to see a lot of
Speaker 1: inflation house prices skyrocket that we start to really call
Speaker 1: it a crisis. I do think in five, ten, fifteen
Speaker 1: years time there will be another cycle where it comes
Speaker 1: back and we're talking about a housing crisis again. But
Speaker 1: at the moment, because a lot of things are flattening
Speaker 1: out and stabilizing, our attention is elsewhere. It is a
Speaker 1: great time to be a home buyer right now. There
Speaker 1: is a a lot of housing stock on the market,
Speaker 1: more than we've had for the last about ten years.
Speaker 1: While interest rates are coming down and so there are
Speaker 1: there are more buyers stepping forward and saying, yes, we
Speaker 1: are going to purchase. But that's not translating into higher
Speaker 1: house prices, and that's not translating into fewer listings property
Speaker 1: listings available on the likes of trade me or one
Speaker 1: roof for real Estate dot courd Denz.
Speaker 2: So finally, ed overall, how do you rate the health
Speaker 2: of the housing market?
Speaker 3: Oh, on a scale of what Chelsea?
Speaker 2: Oh, go on, I haven't thought that far ahead. Give
Speaker 2: it like out of ten stars or something.
Speaker 3: I would give it like a four or a five.
Speaker 1: It's not sick anymore in terms of house prices falling
Speaker 1: massively and homeowner has been really worried about that. Across
Speaker 1: most of the country, it's pretty stable across again, those
Speaker 1: number of listings online, properties selling again, it's all pretty safe.
Speaker 3: I'd give it four or five.
Speaker 1: But having said that, houses are still expensive, right, so
Speaker 1: if you were a first home buyer look at the market,
Speaker 1: you'd say absolutely not, it's one out of ten because
Speaker 1: I'm still struggling to purchase the House.
Speaker 3: Thanks for joining us, ed Thanks Chelsea.
Speaker 2: That's it for this episode of the Front Page. You
Speaker 2: can read more about today's stories and extensive news coverage
Speaker 2: at enzadherld dot co dot nz. The Front Page is
Speaker 2: produced by Ethan Sills and Richard Martin, who is also
Speaker 2: a sound engineer.
Speaker 3: I'm Chelsea Daniels.
Speaker 2: Subscribe to the Front Page on iHeartRadio or wherever you
Speaker 2: get your podcasts, and tune in on Monday for another
Speaker 2: look behind the headlines.