Almost half of the houses sold in Rotorua in since July went for more than $100,000 over their rating value - with the city's western suburbs showing the strongest growth.
Figures provided to the Rotorua Daily Post by QV HomeValue showed 735 residential sales in Rotorua since July, with 47 per cent selling for at least $100,000 above their 2014 rating valuation.
QV HomeValue general manager David Nagel said the Rotorua residential market compared well with similar-sized cities with annual value growth of 28.7 per cent which was 29.4 per cent above the residential peak of 2008, just after the global financial crisis.
"On average, properties are selling around 40 per cent above their 2014 rating valuations, with most of that value growth (28.7 per cent) occurring in the last 12 months."
He said value growth had been relatively consistent throughout the city, although the strongest growth - on average 54 per cent above the 2014 rating value - had occurred in the western suburbs area, which was attractive to both first-home buyers and investors.
The rating values are due to be revised later this year, with current rating values last set in July 2014.
Rating values are fit for purpose mass appraisal valuations carried out once every three years on behalf of the district council to aid it as part of setting rates, and do not include chattels.
In Western Heights several properties sold for more than twice the rating value (RV) with one which had a valuation of $113,000 selling for $243,000.
Another Western Heights property sold at almost two and a half times the RV at $255,000.
In Owhata, a house with an RV of $148,000 sold for $473,500 while a Glenholme property with an RV of $114,000 sold for $249,000 in November.
Real estate agents say the number of houses selling above rateable values - especially in the western suburbs - is not surprising.
Ross Stanway, chief executive of Eves and Bayleys Real Estate, said the big growth was in areas that historically tended to be more affordable.
"Certainly people believe there is really good value for money, and the opportunity to add value."
He said in some streets or suburbs people moved into the area and tidied up or renovated a home, which triggered almost a chain reaction with others following on.
"Rateable value is just a measure at one point in time ... the market obviously sees things quite differently."
Steve Lovegrove, co-owner and principal of Professionals McDowell Real Estate, said the number of houses selling well in excess of rating valuations didn't surprise him.
"It is very interesting because we have seen such a massive increase in house price growth over the last year.
"It's almost impossible to imagine that same rate of growth would continue but I think at a lesser rate we will see property prices continue to increase."
Mr Lovegrove said they were still experiencing a demand and population growth that exceeded the level of new housing, which meant more competition from buyers.
He said one of the most dangerous things a house seller could do was look at historical values because nobody could really say the potential for what a property could sell for.
"It comes down to the potential buyer."
He said rateable values had now become "excessively unreliable".
He believed the growth in the Western Heights was down to a renewed interest in the area, which he believed had been under-appreciated in the past.
"It perpetuates itself."
Mr Lovegrove said he believed the easy access to Auckland and Tauranga, as well as the city centre, was part of the appeal behind the western suburbs.
LJ Hooker Rotorua principal Malcolm Forsyth said the difference between the rating values and the price houses were selling for demonstrated how much the market had moved on in the past few years.
He said he had a "love-hate" relationship with the values as they became out of date so quickly.
Mr Forsyth said the growth in values in suburbs like Western Heights and the eastern suburbs were because of the "explosion" in people realising the potential in those suburbs.
"Rotorua has seen strong growth and that has happened because we are so far behind the eight ball.
"We have seen some huge movement in Rotorua and to be honest I don't think we have finished yet. There is only one way to go and that is up."
Mr Forsyth said while real estate agents didn't typically admit it, he had been surprised at some of the prices being paid for properties.
