Bruce Morris looks at the link between selling price and capital valuation to pinpoint Auckland suburbs that are running ahead of the pack.
Capital valuations are treated with a fair degree of scepticism in the residential property market, but they can be a valuable pointer to how individual suburbs are going.
On the surface, a CV set in 2007 (as for the old Rodney and Waitakere areas) or 2008 (the old Auckland City Council suburbs, North Shore and Manukau) would seem to have little relevance for people looking to buy or sell a house today.
But CVs, set every three years and a key part of local authority rating valuations, can give a useful guide to current value, though perhaps more in a suburb-wide way than for a specific house.
Capital values are designed to reflect the price that would have been paid for the property at the time the valuation was set, less the cost of chattels. Of course, as time moves on and prices shift, a CV can soon look very dated.
Through the various property cycles over the years, CVs have often been pushed up at their three-yearly reassessments, catching up to the market. But it doesn't always work that way, and the Far North gave an example of that last year when new CVs dropped across the board, some down as much as 15 to 20 per cent. Expect more of that this year, though not in many parts of Auckland.
Setting rating valuations is a vast exercise, covering tens of thousands of homes in a city the size of Auckland, and there will inevitably be inconsistency when the main driver is records of local sales rather than actual inspection. Some CVs will be set too high, and others too low.
But as a team of valuers works on fresh rating values for the new Auckland Council - effective from July, and putting all areas of the council on the same basis - it's interesting to look back and see how individual suburbs have moved ahead of the pack, or fallen behind.
Because the old values were set at different times, it's important to keep comparisons within a local authority's boundaries.
But study the QV data in this quarter's Property Report as a guide to how one suburb has gone in relation to another. The column of particular interest in the data is the seventh from the left, showing the average of sale prices in the three months to the end of March 31
compared to actual CVs.
There's a danger in reading too much into a suburb's performance in just one quarter of low sales, but keeping an eye on the indicator over six or nine months should give a good indication of the areas doing well, or poorly.
In the latest quarterly data, for example, One Tree Hill stands out among the old Auckland City Council suburbs with sales running 24.3 per cent above July 2008 CVs.
One Tree Hill prices seem to be going strongly during a time of low sales, but a glance back over previous quarters suggests it may not be going quite that well. The average quarterly performance over the past year brings the average selling price back to 14.6 per cent across a miserly 44 properties.
That's still a very sound record, pipped by Sandringham where sales have run at an average 15.1 per cent above CV over the past year (with 136 properties sold), and just ahead of Westmere (61 properties) and Freemans Bay (59 properties) at 14 per cent.
But the real star of the Auckland market continues to be Grey Lynn, which last quarter recorded 28 sales, with prices averaging 30 per cent above CV. That is staggering, and it was no aberration.
Grey Lynn is enjoying a remarkable run as the valuation ripple effect crosses the border from posh neighbours like Ponsonby, Herne Bay and Westmere. In the last year, across 145 sales, prices were 23.3 per cent above the 2008 CV - suggesting big rate rises will soon be on the way.
Elsewhere in the old city, suburbs like Lynfield (13.4 per cent above CV for the year to March 31), Mt Eden (13 per cent), Glendowie (12.6 per cent), Pt Chevalier (11.7 per cent), Mt Albert (11.1 per cent), Ellerslie (10.9 per cent) and Epsom (10.75 per cent) are also going strongly, though like elsewhere sales are just half the levels of four and five years ago.
Some of the blue-chip suburbs are relatively subdued, like St Heliers (up an average of 3.1 per cent against CV over the year) and Mission Bay (up 4.2 per cent).
At the bottom of the performance list on this measure is Pt England (with selling prices against CV down 4.9 per cent over the last year) and Otahuhu (a drop of 4.5 per cent).
In the old Rodney district, Omaha is the one bright spot - just sneaking into positive territory this quarter and for the last year. Rodney CVs were assessed just as the boom was petering out, so even flat prices are something to feel happy about.
On the Shore, where the last CVs were set three months before Auckland on a sliding market, no area is showing anything like the gains of some of the central city suburbs and several have slipped below CV.
A similar story out west on 2007 CVs, but in Manukau there are wide variations.
Suburbs such as Somerville (up 11 per cent against the 2008 CV over the year), Mellons Bay (up 10.9 per cent), Highland Park (up 8.6 per cent), Howick (up 8.5 per cent), Botany Downs (up 8.4 per cent) and Half Moon Bay (up 5.9 per cent) are going well.
But areas like Manurewa, Manurewa East, Papatoetoe and Otara are all deep in negative territory, with just the promise of rate cuts to brighten the picture.
* From the New Zealand Herald's quarterly 'Property Report' - a guide to house prices and great places to live.
