Mayor Dave Cull said the new valuations, which will be mailed to home owners this week, were a result of the city's success.
``We want people to come here, we want more demand, and that will put prices and values up.
``I guess that's the price you pay for getting what you want.''
There may also be a price to pay for home owners whose increase is above the average, with a possible rates rise in the offing next year.
The council said yesterday there had been an overall 12.6% increase in capital value, and a 19.5% rise in land value for Dunedin homes in the past three years.
That compared with a 2.8% drop in 2010, and a 3.1% rise at the previous valuation in 2013.
The biggest movements by suburb included central city north, Macandrew Bay and Broad Bay, Brockville and Green Island, where many residents will see big increases in what Quotable Value (QV) says their homes are worth.
But Real Estate Institute of New Zealand regional spokeswoman Liz Nidd warned the valuations were not a result of valuers visiting houses, and could lead some people to get the wrong idea of what their home was worth.
``Some of them are spot on, some of them can give people an expectation which is beyond what the market would reflect.''
Acting council chief financial officer Gavin Logie said the data showed the average house in Dunedin was now worth $335,000, compared with the 2013 average of $289,800.
The commercial and industrial property market overall was showing small to moderate growth, with a 7.6% increase for commercial property and a 5.6% rise for industrial, compared to 2013 capital values.
Rural properties showed an average increase of 18.9%, and dairy 10.9%.
The council's valuation service provider, QV, revalues Dunedin's 55,185 rateable properties for rating purposes every three years.
Mr Logie said there would be no change to rates before the next annual plan was approved in June next year.
``But yes, you could say if your increase was different to the standard there is a probability that part of your rates will be subject to an increase.
``Correspondingly, if you're below the average, then there is a probability that maybe your rates will go down.''
The change to rates from the valuation change would be to the general rate, not to fixed rates for aspects like water, drainage and recycling.
QV registered valuer Tim Gibson said for residential areas valuers looked at the latest sales, from March onwards, though not ``non-market sales'' like sales within families, mortgagee sales, or those over the price that would be expected.
Data from building consents for each property, from a garage to a new house, was added to the valuation.
The majority of properties had also been ``externally inspected''.
Mr Gibson said the 12.6% increase was a result of ``supply and demand''.
Agents were short of good listings and there was ``reasonable demand'' for everything from first-home buyers to investment properties.
On the rise in Brockville, he said the lower end of the market - ``entry level stuff'' - got more of a percentage increase than the likes of homes in Maori Hill.
At the other end of the scale, Middlemarch's -18% reflected low demand for residences in the area, which had ``not too much in the way of services''.
On the relationship between the rating valuation and what a house might return if sold, Mr Gibson said the QV valuation was ``a mass appraisal snapshot'' as at July 1, for rating purposes.
The value was considered, however, by some lending institutions and other organisations ``rightly or wrongly''.
Mr Cull said for those who were selling their houses and buying elsewhere in Dunedin it would not make a lot of difference.
There would be rates rises for some from the valuation increase, but that would be ``slight'' and from a low base.
Mr Cull said there was a negative aspect in the rise making it difficult for first-time buyers to get into the market.
``That is a problem being felt all over the country, in some place way worse than it is here.''
Mrs Nidd warned the rating valuations did not necessarily reflect the commercial reality.
Sellers going to the market were inclined to get ``hung up'' on the rating valuation, sometimes going in with wrong expectations.
Quotable Value data for October showed Central Otago values were up 21.5% on a year ago, and Queenstown Lakes up 29.8%.
Real Estate Institute of New Zealand data showed median house prices, September to September, rose 41% in Central Otago Lakes district to $694,500, Queenstown rose 21.4% to $837,500 and Dunedin 6.4%, to $311,000.
