Unintended consequences: the use of property tax valuations as guide prices in Wellington,New Zealand

Property markets are characterised by a lack of information, particularly in relation to price. Where guide prices are not provided for properties and sale prices for comparable properties are not widely available, buyers and sellers may depend upon valuations of the property that are not intended to act as market valuations. The resulting anchoring heuristics may lead to a reliance on that information in decision-making. Using mass valuation data and house sale transactions for Wellington, New Zealand, between 2007 and 2010, issues relating to transaction volume, transaction prices and the release of government valuation data are evaluated through a two-stage hedonic estimation. The timing of transactions was related to the release of government valuation data as well as significant relationships found between the government value of the land and final transaction price. These findings suggest that transaction price influences are an unintended consequence of making mass valuation information the only freely available information to the public.