Why Auckland CV changes won't affect mortgage lending
Auckland’s updated capital values (CVs) have landed, and many property owners are now seeing paper valuations below their mortgage balances.
While that can make for uncomfortable conversations with clients – especially recent buyers – brokers can reassure them: CVs have limited influence on lending.
CVs down 9% on average—but lenders look elsewhere
This is the first CV update since 2021, when New Zealand’s housing market was at its post-Covid peak. The new values, backdated to May 2024, show an average drop of 9% across Auckland properties.
While the citywide average CV decline was 9%, city-fringe suburbs such as Albert-Eden, Waitematā, and Whau saw the biggest drops of up to 14%, while outer areas like Franklin and Hibiscus and Bays experienced milder decreases of around 1% to 4%.
Some clients may now be questioning their equity position, especially if their CV has dipped below their loan balance. But CVs are not a core tool in credit assessments.
“It’s yesterday’s news,” David Cunningham (pictured left), chief executive of Squirrel, told RNZ.
“In the old days it was but you know now you’ve got all these models from Cotality and Valocity and so on – and you can go on to Homes.co.nz or One Roof and find a pretty damn good valuation. They’ve got the benefit of being pretty much real time.”
Equity concerns? Banks rely on AVMs, not CVs
For clients worried they owe more than their property is “worth” on paper, brokers can clarify that banks use AVMs (automated valuation models) or registered valuations – not CVs – to assess equity and loan-to-value ratios.
“Banks talked about home loan customers being ‘delinquency managed’ which meant that it was only if they stopped paying their home loans that the bank would investigate,” Cunningham said.
Clients struggling with repayments should be encouraged to talk to their bank before any arrears occur.
Low-equity margin removals not tied to CV
For borrowers paying low-equity premiums due to deposits under 20%, Cunningham confirmed that CVs won’t factor into removing those margins.
“Registered valuations might come into play if it's an unusual property or in an area where there aren't a lot of property sales,” he said.
“So, some of the more provincial locations and properties … but for major centres the valuation models, called AVMs, automated valuation models, are what the bank uses.”
CVs rarely relevant to LVR or refinance assessments
Link Advisory’s Glen McLeod (pictured centre) reinforced that desktop or registered valuations carry more weight.
“If you have a sale and purchase agreement for $850,000 and the registered valuation comes in at $850,000 that's what it's worth even if the CV is $750,000,” McLeod told RNZ.
Loan Market adviser Karen Tatterson (pictured right) added that CVs are “rarely” used by banks to assess loan-to-value ratios – and even when they are referenced, they’re already dated.
“The Auckland Council CVs that were released yesterday are based on a value ascertained approximately a year ago, so they are already out of date and do no reflect the true 'market' value of the home,” Tatterson said.
