Gee v Valuer General

Consideration 21It was common ground that the sales for 57, 7 and 19 Coolawin Road are comparable sales. The principal areas of dispute were what adjustments were required to be made to those sales to render them directly comparable, and whether 5 and 9 Minimbah Road are also comparable sales. 22The subject site and the other five sales are waterfront properties in Northbridge, in close proximity to each other, and with similar access to public transport and other facilities. The expert valuers were in general agreement as to the area, shape, topography, views, access, and waterfront facilities, of each of these properties, and their evidence was supported by the view. Having regard to those factors, I am of the opinion that 57 Coolawin Road is a directly relevant comparable sale, and that the sales of 7 and 19 Coolawin Road are indirectly relevant comparable sales. 23Having regard to area, topography, views and access, I agree with Mr Ellis that a significant number of adjustments would be required to the sales for 5 and 9 Minimbah Road, and that those sales are of very limited relevance. These two properties are on a narrow, one way, part of Minimbah Road with a vertical rock face on the opposite side of the road; while both have a northerly orientation, the views are not as extended as those of the properties in Coolawin Road; both are significantly smaller in area (50 percent and 47 percent respectively) than the subject property; and both are steeper blocks with no large building shelf. 24In Holcim (Australia) Pty Ltd v Valuer General [2009] NSWLEC 225 Biscoe J outlined the process of adjusting for differences in comparable sales: 31 The basis for the valuers' valuation assessments is the sales comparison method. Accepted valuation practice permits adjustments for differences, such as in location, area and time to enable valuers to have comparable values which, following adjustment, account for the various differences with the subject property. Such adjustments are generally based on a reasoning process drawing on the skill and experience of the valuer and are undertaken to derive an opinion of value through a deductive process. Because properties are rarely identical, adjustments for differences are obviously necessary but caution is required through making as few adjustments as possible, in a consistent manner, to ensure the reliability of the comparable sale when related to the subject property. Too many adjustments potentially render the comparable sale unsafe to rely upon. Caution is therefore required where large adjustments are to be made. Reflecting the significant roles of skill, experience and personal assessment in the adjustment process, the scope for differences in the quantum and direction of adjustment between valuers can be considerable. 25In Tomago Aluminium Company Pty Ltd v Valuer General [2010] NSWLEC 4, Pepper J held: 45 To this it may be added that it is necessary to make explicit adjustments for differences so that the adjustment process is sufficiently logical. An implicit process comprising a single adjustment, rather than separately itemised and reasoned adjustments, risks rejection for want of transparency. 26I accept the agreed valuation evidence that the appropriate adjustments to make to each of the comparable sales are those relating to land area; land attributes including elevation, building difficulty and frontage to HWM; views; and facilities at HWM. However, neither valuer was able to quantify precisely the adjustments they had made, relying instead on their skill and experience as valuers. 27I accept the agreed valuation evidence that in considering the comparable sales, 7 and 19 Coolawin Road are inferior to 57 Coolawin Road and the subject property, based on their location at the southern end of Coolawin Road and different orientation; smaller area (72 percent and 66 percent of the subject property respectively); and topographical difficulties. Of the two properties, both valuers agreed that 7 Coolawin Road is inferior to 19 Coolawin Road, on the basis that it is a battleaxe lot with difficult access, and inferior facilities at HWM. 28In their respective calculations of the residual land value, the differences between the valuers as to the value of improvements related in large part to the differences in assessed building costs of the dwellings and the ancillary improvements including pool, landscaping, and improvements at HWM. 29There was a significant difference between Mr Webster and Mr Ellis as to the appropriate amount to allow for building costs. The evidence of Mr Webster, which was not disputed, was that Rawlinsons states that for a prestige standard partial air conditioned full brick property in Sydney, the rate per square metre is $2,730 to $2,940. The building costs adopted by Mr Ellis in determining the value of improvements for each of the comparable sales are significantly higher than Rawlinsons, and higher than those used by Mr Webster. In considering whether to accept the costs (and consequent value of improvements) adopted by Mr Ellis or Mr Webster, I prefer Mr Webster's approach, which he described as a more conservative approach, based on his experience of valuing work on behalf of banks for progress payments, in which he had not seen a building that had a higher rate per square metre than $4,500 - $5,000. I am not persuaded that Mr Ellis provided a sufficiently reasoned basis for adopting a cost per sqm significantly higher than that in determining the assessed building costs. 30I am not persuaded that the adjustments made by Mr Ellis to each of the sales based on market conditions are sufficiently reasoned to be adopted. While acknowledging the limitations of using data based on median house prices, the Residex data provided by Mr Ellis shows an increase in median house price from July 2007 to August 2008 and then a decline, and does not support his evidence of a drop of 10 percent over the two year period from July 2007 to July 2009. In relation to 19 Coolawin Road, Mr Ellis allowed an increase of approximately 5 percent from $2,850,000 at 1 July 2008 to $3,000,000 at the sale date of 25 May 2009, and then a drop to $2,790,000 at 1 July 2009. Mr Ellis' evidence was that he had had regard to Residex and official interest rate data for 2008 and 2009, and explained the 6.7percent fall between 25 May and 1 July 2009 as being based on his experience of the market at the time and interest rates. I agree with Mr Webster's assessment that it would be difficult for a valuer to be so precise about market conditions over a 35 day period. I am not persuaded that Mr Ellis' adjustments for market conditions to derive an assessed residual value of $2,790,000 for 19 Coolawin Road is supportable, and I prefer the assessed residual value as determined by Mr Webster. 317 Coolawin Road was agreed by the valuers to be an inferior property to 19 Coolawin Road, primarily based on the difficulty of access. Neither valuer explained in detail the adjustments they had each made to reach a residual land value, $4,700,000 by Mr Webster and $3,500,000 by Mr Ellis, and the disparity between these values and those adopted for 19 Coolawin Road was not explained. While 7 Coolawin Road has more difficult access than 19 Coolawin Road, the land area is slightly larger, and improvements at HWM are similar, both having a boatshed while 19 Coolawin Road also has a slipway. Both valuers adopted a similar depreciation rate for the dwelling. In the context where there was agreement as to the factors for which adjustments should be made, but no quantification of those separate adjustments, and where there was agreement as to the inferiority of 7 and 19 Coolawin Road in comparison with 57 Coolawin Road and the subject property, on the evidence before me I am not persuaded that the residual land value of 7 Coolawin Road as determined by either Mr Ellis or Mr Webster is sufficiently reasoned to provide a basis for comparison with the subject site. 32The applicant submits that the evidence of Mr Ellis that the residual value for 57 Coolawin Road is $3,350,000 should be accepted; and that based on the agreed superiority of 57 Coolawin Road to the subject property, the residual value of the subject property should be in the order of $3,000,000 to $3,300,000. For the reasons given above, I am not persuaded that the value of the improvements at 57 Coolawin Road as determined by Mr Ellis should be adopted. Mr Webster's estimated cost of the terracing work at the rear of the property, which was not disputed, would fall within paragraph (d) of the definition of "land improvements" in s4(1) of the Act and would accordingly be taken into account in determining the land value. Accepting that fewer adjustments are needed for the sale of 57 Coolawin Road than those for 7 and 19 Coolawin Road, and accepting the agreed inferiority of both those sales to 57 Coolawin Road and the subject property, I am not persuaded that there is a sufficiently reasoned basis for the residual land value adopted by Mr Ellis for 57 Coolawin Road. 33The applicant submits that the fall in property values between 2008 and 2009 in the order of 10 percent would mean that the underlying value of the subject property as assessed by the respondent could not have remained the same in 2009 as it was in 2008. I agree with the respondent that the appropriate approach to adopt to determining the land value is that adopted by the valuers, namely a determination of the residual value. The evidence before me does not support a residual land value for the subject property being lower than that for 19 Coolawin Road (as determined by Mr Webster) or significantly lower than that for 57 Coolawin Road. I am not persuaded that the applicant has discharged the onus imposed by s40(2) of the Act. The application must therefore be dismissed.

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Judgment (7 paragraphs)

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Cases Cited (2)