Hi all,
I have received my rates bill and it states:
Site Value $154,000
Capital improvement value $311,000Does capital improvement value include the site value or do I add them together to get $465,000 total value?
If it was the latter, would the bank consider this as evidence of higher value when refinancing?
These numbers are for statutory ratings purposes only. The valuation has not been commissioned by you for a special purpose, you are not privy to those instructions & it has been undertaken using mass valuation methods.
So, in short, no.
From my understanding of it, Site Value indicates the value of the land only. Capital Improved Value indicates the value of the land plus the house or other improvements you've made to that land. Hence, the total value of your property is $311,000, based on council valuation. That said, those figures are put in place for the council to calculate your rates and also for calculation of land tax by the SRO, if it applies to you. They do not constitute a true bank valuation.
Having said that, the figures on the rates notice usually seem conservative versus the final sale price or a bank valuation (which is itself conservative). I have read at least one book that talks about a quick and dirty means of valuation of a property by adding the site value to your estimate of how much the building (and out buildings) would be worth, and how much it would cost to replace.
For example, if the site value on the rates notice is $300,000, and the current house is old, estimated to be worth $195,000, and would cost approximately $260,000 to replace, add those figures up and you'll have a very rough, estimated value of the property at between $495,000 and $560,000.
Now I don't necessarily agree with this methodology and I'm sure it doesn't work 50% of the time, but it was something I read from a book that I thought would be worth sharing here. Nothing beats an independent valuation of course…and even the bank's valuer works for the bank, not for you, hence their valuation may not necessarily be reliable.
In some cases I've seen people consider that they 'got a good deal' because they bought the house for less than the capital improved value on the rates notice. It may be true that they did get a bargain, however I wouldn't assume this to always be the case, especially based on values in a rates notice.
BTW, I've read your other posts with interest. If you're considering the Australian housing market is going to correct in the manner you predict, then you're better off selling your house rather than considering refinancing and taking out a bigger loan on 'equity'.
Thanks guys. This is a property that I have already sold under a wrap deal. I am assisting the wrappee to get bank finance if possible.
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