RESPONDENT
Ms M Carpenter, Barrister
Instructed by Mr R Ghanem,
Solicitor for Valuer General
File Number(s): 30157 of 2014
[2]
JUDGMENT
This is an appeal by Mr Keith Barrett (the Applicant), under Section 37 of the Valuation of Land Act 1916 (the Act), against the land value (Land Value) assessed by the Valuer General (the Respondent) in respect of the property known as 115 Chelmsford Street, Newtown (the subject property).
[3]
Background
The Applicant was self-represented.
The Respondent was represented by Ms M Carpenter, Barrister, instructed by Mr R Ghanem, Solicitor for the Respondent.
The Land Value of the subject property at 1st July 2012 (the Base Date) was assessed by the Applicant at $297,000 and by the Respondent at $385,000.
The matter was the subject of mediation under s26 of the Civil Procedure Act 2005 but the parties were unable to reach agreement.
The matter was the subject of an on-site inspection on 13th November 2014, followed by a hearing in Court on the same day.
Section 40(2) of the Act states:
"On an appeal, the appellant has the onus of proving the appellant's case."
[4]
The subject property
The subject property is located in Newtown, an inner western suburb being approximately six kilometres south west of the Sydney CBD in an established residential area.
Situated part-way along Chelmsford Street, the subject property is approximately 0.25kms from the Newtown retail/commercial precinct and very close to the overland railway line.
The subject property is improved and comprises an attached terrace house that has been extensively extended to the rear, with access at the rear.
With a site area of 113.8sqm, the subject property comprises an irregularly shaped block.
The subject property is zoned R2 Low Density Residential under the Marrickville Local Environmental Plan 2011.
The subject property comprises Lot 3 in Deposited Plan 220759.
[5]
The issues
As we understand the Applicant's submissions:
1. the approach to the assessment of value for the purposes of s6A of the Valuation of Land Act 1916 by the Respondent lacks transparency and adopts confusing and ambiguous terminology (including such terms as "Statutory Land Value", "Adjusted Land Value" and "Analysed Land Value"), so not facilitating objective comparison of properties and so disadvantaging an objector;
2. the assessment of value by the Respondent is "almost entirely based on subjective estimates and/or assessments" and lacks objective data (other than in calculating the value of built improvements);
3. the Respondent's assessment of land value "is totally dependent on land valuations which have been incorrectly calculated and do not comply with s6A(1). The Valuation Assessment is therefore flawed and unreliable" with the assessed land values being unachievable in the event of sale;
4. land values relied upon by the Respondent were not independently calculated;
5. the Respondent's assessment of land value "does not reflect the actual market", with the market comprising the sale of improved properties being "what people talk about", such that the Respondent does not comply with the Valuation of Land Act 1916;
6. the value of the subject property for the purposes of s6A of the Valuation of Land Act 1916 as at 1st July 2012 is $297,000;
7. the Respondent has erroneously assessed the value of the subject property at $385,000 as at 1st July 2012;
8. the rate of change in the value of improved property over a given time period is the same as the rate of change in the value of land over the same time period;
9. the value of the subject property for the purposes of s6A of the Act should have regard to changes in the transaction prices of improved property over time;
10. in 2007 (being immediately prior to the Global Financial Crisis when "land values were at peak levels"), five nominated improved properties transacted at an average rate of $5,003psm land area;
11. in 2012, eleven nominated improved properties transacted at an average rate of $6,354psm land area;
12. the difference between the average rate psm improved value between 2007 and 2012 is 27.0%;
13. paired sales of improved properties:
1. at 1 Albert Street showed an increase of 28.5% in transaction price between 2007 and 2011, compared to an increase of 40% in the Respondent's assessment of land value over the same period;
2. at 107 Albemarle Street showed an increase of 33.1% in transaction price between 2006 and 2012, compared to an increase of 65.5% in the Respondent's assessment of land value over the same period;
3. at three other addresses showed increases of 20.5% between 2003 and 2012 (Respondent land value increase 67.6%), 66% between 2002 and 2011 (Respondent land value increase 111%) and 81.8% between 2001 and 2012 (Respondent land value increase 99.9%);
1. in 2007, the Respondent assessed the land value of the subject property as $234,000;
2. applying an increase of 27% to the Respondent's 2007 assessment of land value results in a 2012 assessment of land value of $297,000 which is below the Respondents assessment of $385,000;
3. the Respondent's expert valuer inconsistently reflected the adverse impact on security of front and rear access, scope for extension (the subject property being fully developed), train noise, the impact of pedestrian and traffic noise from Bedford Street and car access in his treatment of comparable sales in his valuation report; and
4. a consistent reflection of security risk, scope for extension, train noise traffic noise and car access on the Respondent's comparable sales results in a land value range of $291,328 to $374,060 for the subject property.
As we understand the Respondent's submissions:
1. the Applicant bears the onus of proof;
2. the Applicant has tendered no expert evidence;
3. the Applicant has misunderstood the basis of valuation under the Act and the requirement to assume that improvements had not been made under s6A(1);
4. the methodology relied upon by the Applicant is novel, whereas that relied upon by the Respondent is conventional and the valuation evidence tendered is clear, logical and transparent;
5. the methodology adopted by the Applicant relies on land values previously determined by the Respondent and percentage increases;
6. the Applicant has not proven its case; and
7. the appeal should be dismissed and the valuation of $385,000 as at 1st July 2012 confirmed.
[6]
The valuation evidence
Mr Webster, Registered Valuer No 2463, tendered as evidence an undated valuation of the subject property at the Base Date and gave expert evidence on behalf of the Respondent.
Concerning the highest and best use of the subject property if vacant land, Mr Webster contended this to be as a site for single residential development.
Concerning accumulation of potentially genuinely comparable sales evidence to identify and establish a pool of relevant comparable sales from which information may be deduced concerning the value of the subject property, Mr Webster provided seven potentially comparable sales for consideration.
Concerning analysis of potentially genuinely comparable sales, Mr Webster adopted $psm land value as the appropriate unitary rate to provide a common basis of expression and made deductions for improvements, using a process outlined in oral evidence, to derive an analysed value range of $3,012-$4,051 psm. We note that, by allowing for existing improvements in his analysis, Mr Webster effectively reflects any potential for further development of improvements in the resulting land value rate.
Concerning adjustment of potentially genuinely comparable sales to a hypothetical expression of value as a unitary rate in the context of the subject property through the reflection of differences (such as size, location, use, date, etc) between the respective potentially comparable sales and the subject property, Mr Webster, appropriately in our view, made percentage adjustments for off-street parking/vehicular access and proximity to railway line, but not for location, traffic volumes, site area, frontage, views or the passage of time, to derive an adjusted value range of $3,388-$3,925psm.
Concerning application of potentially genuinely comparable sales to the subject property to determine the value of the subject property through a consideration of the relevance (such as being limited, indirect or direct) of the unitary rate derived from those adjusted comparable sales relative to the subject property, Mr Webster had principal regard to the sale of 111 Chelmsford Street, Newtown showing an adjusted land value of $3,388psm (which we note is the lowest adjusted land value in Mr Webster's sample). Applying this rate to the land area of the subject property (113.8sqm) resulted in a Land Value of $385,554 which Mr Webster considered supported the Respondent's assessment of $385,000 as at the Base Date.
[7]
Findings
We will address our understanding of the Applicants submissions sequentially adopting the order of our summary, above.
Concerning the submissions of lack of transparency, confusing and ambiguous terminology, constraint on objective comparison and objector disadvantage, we find the valuation claimed by the Respondent in these proceedings to be clearly and singularly stated in a form consistent with the Act and capable of objective comparison with other assessments of land value, so affording no disadvantage to the Applicant compared to other objectors in similar matters, such that we find these submissions to be unsupported.
Concerning the submission that the valuation process adopted by the Respondent was based on subjective estimates and lacked objective data, we find that the role of subjective assessment in the valuation process has been accepted by the Courts for over a century:
It is quite true that in all valuations, judicial or other, there must be room for inferences and inclinations of opinion which, being more or less conjectural, are difficult to reduce to exact reasoning or to explain to others. Everyone who has gone through the process is aware of this lack of demonstrative proof in his own mind, and knows that every expert witness called before him has had his own set of conjectures, of more or less weight according to his experience and personal sagacity. In such an inquiry as the present, relating to subjects abounding with uncertainties and on which there is little experience, there is more than ordinary room for such guesswork; and it would be very unfair to require an exact exposition of reasons for the conclusions arrived at (Isaacs J in Spencer v the Commonwealth [1907] HCA 82; (1907) 5 CLR 418 at 442 quoting the Privy Council in Secretary of State for Foreign Affairs v Charlesworth, Pilling & Co [1901] AC 373 at 39).
On this basis, we find this submission to be unsupported.
Concerning the submission that the Respondent's valuation is based on incorrectly calculated land valuations, we find (below) that the Respondent's expert valuer witness has generally followed the valuation process set out by previous decisions of this Court, relying on comparable sales of improved property without regard to other land valuations. Further, the Applicant did not tender any evidence in support of the submission that assessed land values were unachievable in the event of sale, such that we find this submission to be unsupported.
Concerning the submission of a lack on independence in the calculation of land values by the Respondent, we note that Mr Webster gave oral evidence that he was not a "VG contractor" and formed his valuation opinion independent of the Valuer General, such that we find this submission to be unsupported.
Concerning the submission that the "actual market" comprises the sale of improved properties, we note that the Act refers to "the land value of land . . . assuming that the improvements . . . had not been made" (s6A(1)) such that we find this submission to be unsupported.
Concerning the submission that the rate of change in the value of improved property over a given time period is the same as the rate of change in the value of land over the same time period, we note that the Applicant did not tender any evidence in support of the submission, such that we find this submission to be unsupported.
Concerning the submission that valuation for the purposes of the Act should have regard to changes in the transaction prices of improved property over time, we concur to the extent that potentially genuinely comparable sales may occur at a different time to the date of valuation and so require adjustment (Hoy v Coffs Harbour City Council [2014] NSWLEC 1217 at [77]) but do not concur to the extent that the Applicant may be suggesting a 2012 assessment of the value of land should be based on the trend from assessments of the value of land from previous periods (Deputy Federal Commissioner of Taxation v Gold Estates of Australia (1930) Ltd (1934) CLR 509 at [6], Flack v Valuer General (1952) LGR Vol 18, page 157, Hillman v Valuer General (1938) LGR Vol 14, page 14) and so we find this submission to be unsupported.
Concerning the submission that regard should be had to the average of transaction prices of improved property in 2007, we note that the use of averages is "unsound" and "may lead to a grave injustice" (McCathie & Others v Federal Commissioner of Taxation (1944) Vol 69 CLR, Daandine Pastoral Co Pty Ltd v Commissioner of Land Tax (1943) 7 The Valuer 299) and the notion of relativity to an historic period is inconsistent with the well-established principle that if potentially genuinely comparable sales are available, their direct comparison should provide the conventional method of valuation (Marroun v Roads and Maritime Services [2012] NSWLEC 199 at [196], following Graham Trilby Pty Limited v Valuer General [2008] NSWLEC 217 at [41]; Redeam Pty Ltd v South Australian Land Commission (1977) 40 LGRA 151 at [156], River Bank Pty Ltd v Commonwealth of Australia (1974) 31 LGRA 244 at [484], Hoy at [59]), such that we find this submission to be unsupported.
Concerning the submission that regard should be had to the average of transaction prices of improved property in 2012, while we accept that the eleven nominated improved property transactions may be of relevance if subject to the four sequential step valuation process comprising accumulation, analysis, adjustment and application outlined previously by this Court (Marroun at [197], Tenstat Pty Ltd v Valuer General, Woolworths Limited v Valuer General [2012] NSWLEC 1361 at [36], Adams v Valuer General [2014] NSWLEC 1005 at [29], Chircop v Transport for NSW (2014) NSWLEC 63 at [35] and Hoy at [60]), we note that the use of averages is "unsound" and "may lead to a grave injustice" (McCathie, Daandine Pastoral Co) such that we find this submission to be unsupported.
Concerning the submission that regard should be had to the difference between the average improved property transaction price of a sample in 2007 and that of a different sample in 2012, we note that the use of averages is "unsound" and "may lead to a grave injustice" (McCathie, Daandine Pastoral Co) such that we find this submission to be unsupported.
Concerning the submission that regard should be had to paired sales, to the extent that paired sales, properly analysed, may provide an indication of the effect of the passage of time for use in the adjustment step in the comparable sales valuation process we accept the proposition, but to the extent that unanalysed and unadjusted paired sales are used to dispute differences in the Valuer General's assessment of land value between proximate dates, we find this submission to be unsupported.
Concerning the submission that regard should be had to the Valuer General's assessment of the land value of the subject property in 2007, we note that it is well-established that greater weight should be given to comparable sales, if available, than to previous Valuer General assessments (Falk v Chief Commissioner of State Revenue [1999] NSWLEC 301 at [4]) and that statutory determinations for prior valuing years are not of themselves market evidence of later land values, such that we find this submission to be unsupported.
Concerning the submission that the 2012 land value should be based on the 2007 land value increased by a percentage reflecting the change in average transaction prices of two samples of improved properties, we note the well-established principle that if potentially genuinely comparable sales are available, their direct comparison should provide the conventional method of valuation (Marroun at [196], following Graham Trilby at [41]; Redeam at [156], River Bank at [484], Hoy at [59]) and the rejection by various Courts of a percentage increase approach (Gold Estates at [6], Flack, Hillman). Further, the suggested method is not consistent with s6A of the Act with respect to the assumption of land void of improvements (other than land improvements), such that we find this submission to be unsupported.
Concerning the submission that the Respondent's expert valuer made inconsistent adjustments to analysed potentially genuinely comparable sales, we note that such adjustments were explored at some length in oral evidence and we consider were satisfactorily explained by Mr Webster, such that we find this submission to be unsupported.
Concerning the submission that consistent adjustment may result in a land value range of $291,328 to $374,060 for the subject property, we note that this is the opinion of a lay person and not the evidence of an expert valuer, such that we find the submission to be unsupported.
Accordingly, having regard to the evidence tendered and to our findings above, we do not consider that the Applicant has sufficiently proved the Applicant's case as required by s 40(2) of the Act.
Having regard to the valuation evidence, we note that Mr Webster generally followed the valuation process set out by previous decisions of this Court, with his valuation affording a high level of transparency leading to an explicable assessment of value (Marroun at [206], Hoy at [88]).
Accordingly, we accept Mr Webster's conclusion that the Respondent's assessment of Land Value as at the Base Date of $385,000 is supported.
[8]
Orders
The orders of the Court:
1. The appeal is dismissed.
2. The Land Value for the property known as 115 Chelmsford Street, Newtown as at the base date of 1 July 2012 is $385,000.
3. No order is made as to costs.
4. The exhibits are returned.
Dr David Parker Mr John Maston
Acting Commissioner of the Court Acting Commissioner of the Court
[9]
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Decision last updated: 13 May 2015