Unimproved values of ACT properties have risen on average by nearly 38 per cent, with values in one Canberra suburb up 61.1 per cent.
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The ACT Revenue Office completed extra checks this year to ensure the steep rise in the newly calculated values reflected the best estimates of ACT land values.
Chief Minister Andrew Barr said a significant volume of property sales in the ACT reflected the increase in unimproved values.
Despite the eye-watering increase, the ACT government has reiterated the change in land values does not determine annual rates revenue.
For the year to January 1, 2022, unimproved land values increased 37.9 per cent on average across the ACT.
Fisher had the highest increase in total unimproved values at 61.1 per cent, followed by Duffy (59.8 per cent), Griffith (59.6 per cent) and Evatt (56.5 per cent).
Taylor had the smallest increase at 7.7 per cent, while total unimproved values were up 11.6 per cent in Whitlam and up 13.1 per cent in Greenway.
What is unimproved value?
A property's unimproved value is what the ACT government deems a block of land is worth subject to its "highest and best use in accordance with the Crown Lease purpose clause".
The unimproved value does not include any buildings, gardening, paths or fences on the land and therefore will often be different to the property's market value.
The government engages contractors to value all blocks of land on an annual basis. Values are calculated based on sale prices of similar properties, not on suburb-by-suburb increases.
Some assumptions need to be made in established suburbs where there are no recent sales of empty blocks. It is easier to calculate the unimproved value of blocks in areas with contemporary sales information for vacant sites.
Why the large increase?
The ACT government said the 2022 unimproved residential land values reflect the uplift in property prices that has occurred over the past 12 to 18 months.
According to property data firm Corelogic, Canberra dwelling values rose 24.9 per cent over the 2021 calendar year.
Over the 18-month period from June 2020 to December 2021, Canberra dwelling values rose 31.3 per cent.
How does it influence the rates you pay?
It is not the change in land values that determines rates revenue each year.
Mr Barr said the ACT government had no plans to use the rapid increase in unimproved values to justify increases to residential rates.
"To be clear - the general rates for any property does not increase by the percentage increase in the unimproved value of the property," Mr Barr said.
The government uses the average unimproved value of a block - calculated from the most recent five years of unimproved values - to determine the proportion of the total rates revenue the block's lessee will pay.
The more a block is worth, the larger its share of the total rates revenue pool. But the dollar value of the land does not determine the rates levied on it.
The rates bill each block lessee pays is made up of two parts: a fixed charge and a valuation charge.
The fixed charge for residential land is $830 a year, while residential units pay $882 annually.
READ MORE: How rates change in each ACT suburb for 2022
The average unimproved value determines the distribution of the total value of rates charges between properties.
"The average unimproved value of a property - through the applicable rating factors - is an input to determine the proportion of the total general rates collection across the ACT for which a property would be liable," an ACT government spokesperson said.
Budget papers show the total residential rates pool to be collected will increase by between 5 and 6.3 per cent a year over the forward estimates.
In 2021-22, the government estimates it will collect $674.2 million in general rates. The government has forecast it will collect $716.1 million in 2022-23, an increase of 6.3 per cent. In 2025-26, the government expects to collect $840.5 million.
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The government has said the total rates value levied on existing properties will increase by 3.75 per cent each year, but the values of rates levied on new properties is counted as an additional increase to the total rates collection.
The values in the budget demonstrate the significant increase in unimproved values will not translate into significant increases in residential rates, but indicate the government will need to adjust the way it uses the dollar values to calculate the rates bill for each block.
The government is yet to announce how the fourth stage of its two-decade tax reform will affect residential rates. The third stage will continue until 2025.
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