A new report shows NSW land values fell in 2023 despite house prices rising throughout the year.

The NSW valuer general, who sets land values for rating and taxing, found an overall decrease of 1.6 per cent in the year to July.

The report attributes the decline to interest rate rises, inflation and increasing construction costs.

However, CoreLogic data shows home values rose 11.1 per cent in Sydney and 2.4 per cent in regional NSW across 2023.

So, how is the discrepancy explained?

It comes down to when the data was captured, according to Chris Martin, a senior research fellow at UNSW’s City Futures Research Centre.

The valuer general’s report straddles the second half of 2022 and the first half of 2023.

“[The report] reflects that there was a decline in the market generally after the RBA started its series of interest rate increases in May 22,” Dr Martin said.

He said it followed a couple years of “very strong” house price growth during the pandemic.

What can property owners expect?

With the valuer general’s figures used to apply council rates, can ratepayers expect any reprieve?

Not unless values fall for a few years in a row, said Shanaka Herath, a senior lecturer housing economics at UTS.

“Usually, the council rates are calculated on a rolling basis, on three averages,” Mr Herath said.

“If we see, for example, land values declining in the next two years, then that will be reflected in lower rates.”

According to the valuer general, all NSW councils are using July 2022 land values for setting rates.

But Mr Herath said the 2023 reduction in land values would be reflected “at least partly” in land tax rates.

“[That is] because we didn’t see any consecutive increase of three years,” he said.