Valuing Your First Home

Market value refers to either an estimate of how much a buyer is likely to pay for a house, or if the house has sold, what a buyer paid for the house.

Real estate agents will often refer to the market value of a house as being "what someone is willing to pay for it".

What you would personally value at it is a different thing. We considered the true value of a house to be what the majority of people would pay for it. For example, we came across scenarios where people would pay 50k over the estimated price due to a nice feature like a very nicely laid out spa. We would argue that most people would not want to pay this much, and it would be more rare to find such a buyer if you were to sell. That said, for this buyer, the personal value to them may have been worth it.

If you like the house significantly more than other people, you may be willing to pay a little more. But do consider whether you're likely to need to sell it soon (and possibly lose money) vs whether you intend to enjoy it for many years, so may gain value from enjoying living in it.

The RV is the ratable value, it’s used to decide how much rates (tax) you pay to the council, based off approximate value of your house RELATIVE to other houses. It's renewed every three years.

It is NOT the true worth of the house. Sometimes it can help to indicate how a market is doing overall i.e. whether most houses are selling 'above RV' or 'under RV', would indicate that overall house prices have gone up/down. But for an individual house, it should be taken with a grain of salt.

How is it calculated?

The RV is calculated by the council based off broad information which it has on recent sales in the area, the size of the house, size of the land, consented works. It doesn’t take into account some other things which give the house value or detract from it such as renovations, house orientation, maintanence condition or special features such as views or a river.

This article by Smith and Partners is great for breaking down exactly what goes into an RV.

What real estate agents will tell you about the RV will be influenced by their desire to get the best result for their client. If the house’s true worth is less than RV or equal to RV, they may try to tell you that the house is worth the price of the RV. If the house’s worth is above the RV, they may tell you the RV is meaningless because of xyz.

Valuing the house yourself

Far more accurate than online valuations if you know the market.

For a particular house, looking for comparable houses (in terms of area, land size, floor size, bedrooms, age, renovations) which have sold recently is the easiest way to get a pretty good guess.

You can find similar houses sold within the past year in the area on https://homes.co.nz/.

We made a list of recently sold houses in the 2-3 suburbs we were looking in when we were looking.

For a particular house we were going to offer on, we would look for similar houses and pastes screenshots from Homes in a document, showing the selling price, land size and basic features. Each house we would write a little note to remember why it might have sold for more/less than the house we're trying to buy.

See our example document here 

Formal valuation

From a professional valuer, costs around 1k. You don't need this usually unless the bank requests it for lending. This is probably the most accurate option but can be expensive.

Home listing sites and online valuations

Free websites like homes, oneroof, propertyvalue will give you estimates. All these estimates are doing is taking basic features of the home e.g. floor area, section size, no. of bedrooms, garages etc, factoring in recent sales in the area. They don't take into account specific features of the house like it's exact location, specific renovations/features etc.

• Homes: Owned by Trademe.

• Oneroof: Owned by NZ Herald.

• Propertyvalue: Powered by CoreLogic which is what banks use for desktop valuations. Possibly the most unbiased free source.

Relab is a paid source, I didn’t use this, but it’s supposedly quite good.

Real estate agents can apply to get the estimate value changed artificially on Homes or Oneroof. On homes, it says ‘agent appraised’ on the website for a few weeks but then the disclaimer disappears and the 'agent-appraised price' often becomes the new homes estimate.

Always check realestate.co.nz for the sale history of a house. We saw a house where it had sold last year, but they had removed this on Homes so there was no indication of this. On realestate.co.nz it listed the sale price of last year, which was an excellent indicator of it's value.

Real estate agent appraisal

Real estate agents have knowledge of the market. Unfortunately, there is likely to be bias in an estimate they give, due to incentive to sell the house. An agent who wants to convince you to go to auction may estimate a lower price so you are more likely to go to auction (thinking it is well within your budget), and an agent doing a deadline sale may encourage you to pay a higher price (as this is their job, to get the highest possible price for the seller).

If the house has or doesn't have certain renovations, it's useful to factor this into the price you're willing to pay.

You can use our list of how much renovations cost as a rough guide.

Some renovations you don't get your money back e.g. doing the roof may cost you 35k, but most people won't pay 35k more for a house with a done roof vs one without. Some renovations like kitchen/bathroom may increase value as much as it cost. As a buyer, we stayed vigilant about the hidden costs of renovations - we valued unsexy things like a new roof, insulation, double glazing.

Renovated vs unrenovated

For us, despite common wisdom of ‘adding value’, we found unrenovated houses to be worse value than renovated ones (more expensive total cost if you add the cost of renovating it). If you can entirely do the renos yourself that is another story though (please do get the appropriate council consents for works that require this however, or you'll have more trouble if you ever need to sell the house).

Beware of a shoddily renovated house just done up to maximise the sale price (new paint over an old fence, old roof, really cheap kitchen (could be cabinet stickers!) and bathroom job (new lino and wall paint etc) rather than new showers, benchtops ovens etc.

Below figures are very approximate ranges based off rough indications from builders late 2024/early 2025. 

Roof

• $25 - 35k

Bathroom 

• Basic: $20 - 25k plastic shower/lino floors

•  Premium: $30-40k tiled shower/floor

Kitchen

• $15 - 30k 

Wall insulation

• We're unsure of the cost of getting a builder to insulate a house. It is a simple but messy job - very labour intensive. It also requires a building consent. 

• Potentially about $20k for a builder to do it in most rooms  

Double glazing

• $30 - 40k - significantly less if done by retrofitted existing frames (aluminium frames must be thick enough)

Large old tree

• $5 - 10k once it requires felling.  An arborist would be required (it's an intensive and risky job for large trees)

Fences

• Not usually too costly, however if the property has a large amount of fence it's worth considering (our house had a massive long driveway, so we budgeted 10k).

• A classic wooden fence costs about $75 to $120 per meter + labour costs. An average section is around 60 metres. A 20-metre wooden fence may cost $3.3k including labour. Source.

Is an older home safe?

The core build of a house lasts essentially forever if it's well built and maintained, hundreds of years even. There is a house in France that has lasted 700 years! We believe it is better to buy a well built 50 year old home than a badly built 20 year old home. After all, all leaky homes were originally new homes. If you do your due diligence, an older home can be a solid home. If you are working on a budget, it is more savvy to buy an older house which is renovated, or renovate it yourself if you're inclined.

What are the pros of a new house?

• Ease. It is undeniably easier for people. You still need to do due diligence, but it's less likely to come back with issues.

• New renovations (updated kitchen, bathroom, roof, fences) and new housing standards (wall insulation, double glazing is mandated).

• Some prefer the layout of newer houses, this is a matter of preference. Open plan design has become popular.

*Note that there is new and there is *new*. Buying a 2004 house in 2024 means it is 20 years old, so it may be due to have some things replaced soon.

What are the cons of a new house?

• High price. If buying a brand new house off, you will pay an even larger premium. We see this as similar to cars - once the house is not new anymore, it will lose it's 'new house value', but you will have enjoyed a house with likely little maintenence issues while it was new.

• May be built with less land and less off street parking, internal garage which inflates your RV (due to it being counted in the floor area).

• If it has not been built yet, there can be complications with this such as delays. Engage a good lawyer and beware of sunset clauses in the S&P: https://www.stuff.co.nz/life-style/homed/first-homes/119147416/on-the-ladder-first-time-buyers-dream-home-contract-cancelled-within-weeks-of-move-in-date 

Get to know your price bracket and what houses tend to sell for in each. Sometimes you need different strategies in different suburbs, price ranges, etc.

Our personal observations (Christchurch, 2024) were that lower price brackets were highly competitive, higher price brackets had less competition but people moved fast on good houses. Every bracket had investors/developers looking for deals.

Houses targetted by developers in our observations:

• Cheap houses on lots of land, which they would likely bowl and build new on (unfortunate for first home buyers who hope to get a cheap deal and renovate the shoddy old house themselves).

• Tended to be in either a 'good area' or an area with lots of development (new townhouses going up, near the central city).

I would avoid going to auction for a house that's good for developers - developers can often outbid first home buyers due to having deeper pockets. They calculate whether buying will be profitable for them in terms of demolishing and selling units, not what the value of the house is to a first home buyer.

What we felt made a difference for whether a house sold for a reasonable price (based off our ancedotal experience in a certain market):

• Efficiently used floor area and land - more floor area and land tends to inflate the RV

• RV is at or below what it's truly worth - if the RV is higher than what you think it's worth, chances are other people/the agent may value it at the RV (even though this isn't the most sensible way to use the RV)

• Vendor/real estate agent’s expectations - what they tell you they want

Be aware that for auctions they often underplay what price they think it’ll go for (to get more people bidding), and for a deadline sale they often overplay the price to get higher offers to choose from.

As we've talked about, we believe there are no deals in the real estate market for your average buyer. Apart from getting extremely lucky, you will always be paying a fair price. You may be able to give up things to get a cheaper house, such as having less land, less sunlight, or whatever it is, however everyone else is likely valuing things similarly to you. This is something we had to come to terms with.

Just a wee note on capital gains - some people may encourage you to spend more on a house, with promise of 'future gains in value'. Realistically, this only matters if you own more than one house, as you will always have to live somewhere. If you own one house and live in it forever, then it doesn't matter how much that house's value changes.

Please take caution in buying a suitable home, as large weather events and ability to insure your home are current and upcoming.

https://www.stuff.co.nz/money/360894627/owning-house-set-become-riskier-these-big-changes-could-hit-your-property-values 

Property in NZ has doubled in price every decade, for the last few decades. However this is no guarantee. No one can definitively predict the future. We saw some new builds where developers had put up a table of "projected price in 10 years" on the listing - there is no way to guarantee such a claim. Property as an investment is like any other, if you buy a stock and it goes down in value, then that is the risk of buying it. But it it stable in the sense you will always need somewhere to live.