Improvement Value
The council's assessed value of the buildings and other improvements on a property, calculated as the difference between capital value and land value.
What is a Improvement Value?
Improvement value represents the value that buildings, structures, and other improvements add to a property above the bare land value. It's calculated simply as capital value minus land value. For example, if a property has a capital value of $800,000 and a land value of $500,000, the improvement value is $300,000.
Improvement value can tell you a lot about a property. A high improvement value relative to land value suggests the buildings are well-maintained, recently built, or significantly upgraded. A low improvement value may indicate older, basic, or poorly maintained buildings โ or that the property's value is predominantly in the land.
For new-build properties, the improvement value should roughly reflect the cost of construction (adjusted for depreciation in subsequent valuations). For older properties, improvement value tends to decline relative to land value as the buildings age and the land appreciates.
Why It Matters for Due Diligence
Understanding the improvement value helps you assess whether you're paying primarily for the land or the buildings. If improvement value is low, the asking price is essentially for the land โ meaning the buildings may not be adding much value and could need significant investment.
This analysis is particularly useful when comparing properties. Two homes at the same price but with different improvement-to-land ratios represent different types of investment โ one in buildings, the other in land and location.
How to Check
Improvement value is shown on the council's rating information, the QV website (qv.co.nz), and the LIM report. It's calculated as capital value minus land value. Compare the improvement value to the apparent quality and age of the buildings to see if the figures seem reasonable.
Frequently Asked Questions
What does a low improvement value mean?
A low improvement value suggests the buildings don't add much to the property's total value. This could mean the buildings are old, basic, or in poor condition โ or it could indicate the land is exceptionally valuable. It may signal development or renovation potential.
Does renovation increase improvement value?
Major renovations should increase the improvement value at the next council revaluation. However, over-capitalisation is a risk โ spending $200,000 on renovations doesn't necessarily increase the property's value by $200,000. Consider the ceiling price for the area.
Related Terms
Capital Value (CV)
GlossaryThe council's assessed total value of a property, including both the land and all buildings or improvements, used primarily for calculating rates.
Land Value
GlossaryThe council's assessed value of the bare land only, excluding any buildings or improvements, used as part of the rating valuation.
Latest Practicable Valuation (LPV)
GlossaryThe council's most recent rateable valuation of a property, used to calculate rates and provide a general indication of property value.
Rates
GlossaryAnnual property taxes charged by your local council to fund public services, infrastructure, and local government operations.
LIM Report
GlossaryA Land Information Memorandum โ an official council report summarising everything the council knows about a property.
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