Blue Mountains Council is calling for a public inquiry into the setting of land valuations

It follows soaring increases in some land valuations this year - the third successive valuation which has inflicted large increases on Mountains ratepayers.

The matter was raised by Independent Cr Daniel Myles at the May 30 meeting. He said the system is "failing" and "has to be consigned to history".

Cr Myles said the market is being "distorted" by Sydney home price increases and "we get caught up in it as well".

The land values are worked out based on a 100-lot group near every home.

"Woe betide you if someone near you has knocked down or renovated a property and sold [at great profit]. It's a lottery ... a heartless bureaucracy. I hope the new government see it is a failed system," said Cr Myles.

According to a council report about a quarter of landowners in the Blue Mountains are facing large council rates increases due to the new valuations, while 36 per cent will have a rate reduction and about 40 per cent will have their rates bill remain the same.

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All NSW councils are legally required to use the valuations to calculate rates.

Blue Mountains City Council doesn't receive extra revenue as a result of the hike in land valuations.

Mayor Mark Greenhill said council is "calling for current rate levels as per the last assessment to be maintained, or rate increases subsidised... so land revaluations don't impact ratepayers".

"Why, over the last three cycles, has the Blue Mountains seen such wild fluctuations?" he asked.

"How can places rise by 100 per cent in a single assessment?"

Cr Greenhill said a public inquiry will help cast light on a process that, "while returning no extra money to council and our community, is instead hurting some very vulnerable people".

"The Valuer General needs to be held accountable for these massive fluctuations," he said.

Council wrote to the state government earlier this year, calling for rates to be held at existing levels. Council has urged ratepayers that "if you think your land is not worth what the Valuer General says it's worth, then challenge it".

A spokesperson for Valuation NSW said residential land values in the Blue Mountains Local Government Area experienced "very strong increases due to property market demand outstripping supply in the LGA between July 2021 to July 2022".

Their professional contract valuers were "familiar with the local area" and "much of this demand was driven by purchasers seeking larger properties to accommodate work from home arrangements, and those migrating to relatively more affordable outer suburban and semi-rural locations. Interest rates had also remained at historically low levels for the majority of the year."

The spokesperson added that NSW was "internationally recognised [and] ranked equal first in a 2019 worldwide review of property tax jurisdictions by the International Property Tax Institute". Property owners could object and supply recent sales advice.

The new land valuations will take effect in rates from July 1 2023. Land owners have 60 days from the issue date of their notice to lodge an objection.

The matter was passed unanimously at the council meeting.