Gatfield v Valuer-General
[2013] QLC 55
•30 August 2013
LAND COURT OF QUEENSLAND
CITATION: Gatfield & Anor v Valuer-General [2013] QLC 55 PARTIES: Bruce and Cheryl Gatfield
(appellants)v. Valuer-General
(respondent)FILE NO: LVA960-11 DIVISION: General Division PROCEEDING: Appeal against annual valuation DATE OF HEARING: 14 February 2013
DELIVERED ON: 30 August 2013 DELIVERED AT: Brisbane HEARD AT: Toowoomba PRESIDENT: CAC MacDonald ORDER: 1. The appeal is dismissed.
2. The site valuation of Lots 10, 11, 20 and 21 on RP 16820 in the County of Aubigny, Parish of Drayton, as at 1 October 2010, is affirmed at Four Hundred and Forty Thousand Dollars ($440,000).
CATCHWORDS: Valuation - site value of single residential property - scarcity of unimproved sales for basis - whether sufficient to establish market - whether premium attached to sales - evidence necessary - none provided - onus of proof on appellant.
Valuation - site value of single residential property - relationship between land size and value per m² - need to consider all features - size, aspect, topography, location, shape of block, zoning - area comparison not proper valuation practice.
Valuation - site value - single residential property - sub-market established for prestige area - relativity between properties desirable - but sales key comparison.
Land Valuation Act 2010
Barnwell v The Valuer-General (1989) 13 QLCLR 13
Department of Natural Resources and Mines v Spender (2003) 24 QLCR 414
Fischer v The Valuer-General (1983) 9 QLCR 44
Grahn v Valuer-General (1992) 14 QLCR 327
Maurici v Chief Commissioner of State Revenue and Anor [2002] 212 CLR 111APPEARANCES: Mr B Gatfield, one of the appellants, on behalf of the appellants
Ms T Johnson, Senior Lawyer, Department of Natural Resources and Mines
Bruce and Cheryl Gatfield (the appellants) are the registered proprietors of a residential property situated in Burns Street, East Toowoomba. Pursuant to the provisions of the Land Valuation Act 2010 (the Act), the respondent Valuer-General determined the site value of the appellants' property, as at 1 October 2010, at $440,000. The appellants have appealed to this Court against that assessment contending, in their notice of appeal, that the site value should be $345,000. At the hearing of the appeal, the appellants contended for a value of $324,500.
Mr B Gatfield, one of the appellants, conducted the appellants' case and gave evidence in support of the grounds of appeal. Mr Gatfield is a licensed real estate person and has worked in Toowoomba for nearly 24 years.
Evidence was given on behalf of the respondent by Mr S Doyle, a registered valuer in the employ of the Valuer-General. Mr Doyle has experience with the Department in rural, residential and urban valuations in the south-west region, dating back to 1993. He was the valuer responsible for making the valuation under appeal.
The subject land consists of four lots, Lots 10, 11, 20 and 21 on RP 16820, in the County of Aubigny, Parish of Drayton. The property has an area of 1,623 m².
Mr Doyle said that the subject land is situated approximately 1 km radially south-east of the Toowoomba Central Business District in a locality known as the Caledonian Estate, and lies in close proximity to parks, cafes and schools. Good access is available to the land via a bitumen sealed road with blue-stone kerbing. Electricity, garbage, town water and telephone services are available.
Mr Doyle described the land as a rectangular lot with a gentle cross-fall from the eastern boundary to the western boundary. It is zoned Residential Conservation, Heritage Conservation Precinct, under the planning scheme for the former Toowoomba City Council which took effect on 8 April 2003. The land is used for residential purposes and is developed with a dwelling, tennis court and pool.
Statutory Provisions
Section 5(1) of the Act provides that the Valuer-General must decide the value of land, as provided for under the Act, for the purposes mentioned in section 6.
Section 7 provides that the value of land is, for non-rural land, its site value.
Sections 17, 18, and 19(1) provide -
"17 What is the land's expected realisation
(1) The expected realisation of land under a bona fide sale is the capital sum that its unencumbered estate in fee simple might be expected to realise if that estate were negotiated for sale as a bona fide sale.
(2) In this section -
unencumbered means unencumbered by any lease, agreement for lease, mortgage or other charge.
18 What is a bona fide sale
(1)A bona fide sale, for land, is its sale on reasonable terms and conditions that a bona fide seller and buyer would require assuming the following (the bona fide sale tests) -
(a) a willing, but not anxious, buyer and seller;
(b) a reasonable period within which to negotiate the sale;
(c) that the property was reasonably exposed to the market.
(2)For subsection (1), in considering whether terms and conditions are reasonable, regard must be had to -
(a) the land's location and nature; and
(b) the state of the market for land of the same type.
(3) To remove any doubt, it is declared that if -
(a) there is a sale of the land in question; and
(b) the bona fide sale tests are complied with;
the sale is a bona fide sale.
(4) In this section -
land in question means land whose value is being decided.
19 What is the site value of improved land
(1) If land is improved, its site value is its expected realisation under a bona fide sale assuming all non-site improvements for the land had not been made."
The subject land is improved non-rural land, and therefore the value to be determined is its site value, on the assumption that the non-site improvements on the land had not been made.
Sales Evidence
Mr Doyle valued the subject land under s 45 of the Act as a single dwelling house. He assessed the value by direct comparison with site values analyzed from sales of vacant residential properties. Mr Doyle relied in particular on three sales, brief details of which were annexed to his valuation report.
Sale 1 is a residential allotment located at 1B Eleanor Street, East Toowoomba. The sale property has an area of 908 m² and was sold on 24 September 2009 for $307,500. Mr Doyle analyzed the sale to a site value of $302,000 and applied a value of $285,000, that is 94%.
Mr Doyle said that the sale was located approximately 710 metres north of the subject and had similar zoning to the subject. His opinion was that the sale was inferior in size as compared to the subject, and that overall, the sale is inferior because of its size.
Sale 2 is a near level irregular shaped residential allotment situated at Boyden Street, East Toowoomba. The property has an area of 1,153 m² and was sold on 27 May 2010 for $390,000. Mr Doyle analyzed the sale to an unimproved value of $384,000 and applied a value of $350,000, that is 91% of the analyzed value. The sale is located in a Neighbourhood Residential zone. Mr Doyle's opinion was that, overall the sale is inferior to the subject because of the size of the sale.
Sale 3 is a near level rectangular residential allotment situated at 14 Eleanor Street, Toowoomba. The property has an area of 410 m² and sold on 16 January 2007 for $150,000. Mr Doyle analyzed the sale to an unimproved value of $147,000 and applied a value of $138,000, that is 94%. The sale is situated in a similar zone to the subject. Mr Doyle's opinion was that the sale is inferior to the subject because of the difference in size between the properties.
Mr Gatfield challenged Mr Doyle's opinion as to the comparability of the subject and the sales. Mr Gatfield said that Sale 1 was superior in quality to the subject because of the aspect and location of the sale. The sale has a northern backyard, he said, is located 50 metres from the gates of the Botanical Gardens and backs onto a million dollar property. By contrast, the subject backs onto a high-set block of units which overlook the subject so that it has been necessary for the appellants to grow shrubs on their back boundary to create some privacy.
Mr Gatfield said that Sale 2 is located about 50 metres from the gates of Fairholme College, one of the finest girls' schools in Toowoomba. He said that his experience in real estate indicated that, in Toowoomba, the further up the hill one goes towards the private schools, the more sought after the area is. The proximity of the sale property to the school is a great attraction to families who will pay a premium price for vacant land in the vicinity of the school.
Sale 3, Mr Gatfield said, is also very close to the Botanical Gardens and has the advantage of two street access. He did not believe the sale was inferior in quality as compared with the subject.
Mr Gatfield submitted that the sales at 1B Eleanor Street and 2 Boyden Street represented much higher prices/m² than all the other sales up to 1,000m² in area, which he detailed in a graph (No 1) annexed to his written statement. However, he accepted under cross examination that the higher prices paid for the two sales may have been caused by the advantages of those properties. The two sales properties are the only ones in the prestige area of East Toowoomba and Mr Gatfield conceded that the area in which those properties and the appellants' property are located is one of the more desirable areas of the eastern part of Toowoomba, near parks and private schools.
In the light of both Mr Doyle's and Mr Gatfield's evidence about the features of that part of east Toowoomba, I have accepted Mr Doyle's evidence that that area constitutes a separate submarket.
I have also accepted Mr Doyle's evidence as to the overall comparability between sales 1 and 2 and the subject. Although both properties have some qualities that are superior to the subject, I am prepared to accept Mr Doyle's professional opinion, as a registered valuer, that they are overall, inferior, to the subject because of the superior size of the subject.
I consider that little weight should be placed on Sale 3. The sale property is only a quarter of the size of the subject and the sale took place in January 2007, almost four years before the date of valuation. There was no explanation from Mr Doyle as to market movements in the intervening period.
Scarcity of vacant land sales in East Toowoomba
The Land Appeal Court has recognized on a number of occasions that the best basis for assessment of unimproved value is the use of sales of vacant or lightly improved parcels of land.[1] Similarly, I consider that the best basis for assessment of site value is the use of sales of comparable parcels of land with similar site improvements to the subject, but otherwise vacant or lightly improved. Of the three sales relied on by Mr Doyle, only Sale 1 was analyzed and applied on a site value basis. Mr Doyle's analysis and application of Sales 2 and 3 were made on the basis of unimproved value. In the absence of any information about any site improvements on Sales 2 and 3, it is difficult to make a like with like comparison for the purpose of ascertaining the site value of the subject. Despite these difficulties on that issue, Mr Doyle's valuation methodology is generally consistent with the Land Appeal Court decisions referred to above.
[1]Grahn v Valuer-General (1992) 14 QLCR 327 at 328 citing Fischer v The Valuer-General (1983) 9 QLCR 44 at 46 and Barnwell v The Valuer-General (1989) 13 QLCR 13 at 17.
Mr Gatfield said that vacant land in East Toowoomba is as "scarce as hen's teeth". He had identified only five vacant residential land sales in East Toowoomba during the period from October 2008 to October 2010. There are 5,237 rateable properties in that area. The five sales were -
Property Area Date/Sale Sale Price Rate/m² 14 Eleanor Street 410 m² 12 February 2009 $166,000 $404.87/m² 20A Phillip Street 499 m² 12 December 2008 $112,500 $225.45/m² 1B Eleanor Street 908 m² 24 June 2009 $307,500 $338.65/m² 2 Boyden Street 1,153 m² 27 May 2010 $390,000 $338.25/m² 6 Montgomery Court 3,512 m² 10 November 2008 $388,000 $110.47/m²
The first, third and fourth sales identified by Mr Gatfield are the sales relied on by Mr Doyle. Mr Gatfield submitted that if the appellants' block were vacant and in a market where buyers had other blocks to choose from in the East Toowoomba area, then a fair and reasonable site value would be $200/m² or $324,500.
Mr Gatfield said that buyers had obviously paid a very high price for vacant blocks in the best locations. He estimated that buyers had paid a 30% premium in East Toowoomba because such land was rare. By contrast, in the comparable suburb of Middle Ridge, there were 176 sales out of a total of 4,701 rateable properties. The median sale price of those properties was $180,000 for a 600 to 700 m² sale block. In Mr Gatfield's opinion it was a question of affordability. People could afford a property in the vicinity of $170,000 to $200,000 whereas a property such as the appellants' was less affordable. Related to the affordability of the purchase prices, are the rates payable on properties with higher values. The consequence of the increase in value of the appellants' property was that their rates would go from $1,100 per annum to close to $3,000.
In Maurici v Chief Commissioner of State Revenue and Anor,[2] the High Court considered a similar issue, that is the impact of a scarcity of unimproved land sales on the validity of a valuation made on the basis of those unimproved sales. In that case, the valuation was made under the provisions of the Valuation of Land Act 1916 (NSW). Section 6A of that Act provided that -
"(1) The land value of land is the capital sum which the fee simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona-fide seller would require, assuming that the improvements, if any, thereon or appertaining thereto, other than land improvements, and made or acquired by the owner or the owner's predecessor in title had not been made."
[2][2002] 212 CLR 111.
The appellant was the owner of a parcel of waterfront land at Hunters Hill, a long settled residential suburb of Sydney in which there are very few vacant residential sites. In valuing the land, the respondent's valuer had compared the appellants' notional unimproved site with two other vacant sites which had recently been sold, and another vacant site which had been sold and resold after a relatively brief period. He effectively disregarded sales of improved lands. Both sides accepted that vacant land in Hunters Hill was scarce if not very scarce. The respondent also accepted that the valuer had not only valued the subject land as if its improvements had been shorn from it but also as if it, now, were a notionally unimproved, and therefore vacant site, which was as scarce as the vacant sites the subject of the sales to which the valuer had effectively had exclusive regard.
The Court recognized that the traditional, and usually unexceptional method of valuing land in a notionally unimproved state is to seek out relatively contemporaneous sales of comparable properties between parties at arm's length, unaffected by special circumstances, such as, for example, a strong desire by a purchaser to buy an adjoining property, and to use those sales as a yard stick for the valuation of the relevant land.
However, the Court held, the method adopted by the respondent in Maurici was defective because the sales chosen were unduly selective. The sales were not representative of sales in Hunters Hill because vacant land in Hunters Hill was scarce. The Court said that a fair estimate of value could only be made on the basis of a fair, that is to say, a reasonably representative group of comparable sales. A group of comparable sales could not be representative if it did not go beyond sales of scarce vacant land. The respondent was not entitled to ignore reasonably contemporaneous sales of improved land, particularly where there was a scarcity of vacant land.
The decision in Maurici was considered and applied by the Land Appeal Court in Department of Natural Resources and Mines v Spender where the Court said[3] that -
"It might be a popular conception, particularly among those challenging a statutory land valuation, that a buyer of scarce land would be prepared to pay a premium over and above 'fair market value' because of that scarcity factor. However for that to be proved or disproved, for the purposes of the statutory valuation process, analysis of the overall relevant market evidence is necessary. For example, just as a sale to an adjoining owner might be shown not to have included a premium, by reference to the overall market, a sale of a scarce vacant parcel needs to be considered in light of the overall market which includes sales of improved parcels.
While a purchaser of a scarce vacant residential parcel may realistically fall into a different category to the purchaser of an existing dwelling, it does not follow that the price such a purchaser will pay does include a premium over fair market value. It would be expected that the prudent purchaser of vacant land will not have confined considerations relevant to purchase price to that narrow market segment. Such a purchaser would hardly be seen as prudent in purchasing a vacant lot, developing it to its highest and best use through the construction of a dwelling if a certain outcome was an overall loss in capital value through the land component, once improved, reducing in value to the extent of the vacant land value scarcity 'premium'. It is also seen as unlikely that a prudent purchaser of an existing dwelling would not become informed of the overall local market, including that for any scarce vacant land."
[3] (2003) 24 QLCR 414 at [55], [56].
The Court went on to say that[4] -
"If the valuation was flawed because it had been made having regard exclusively or virtually exclusively to sales of scarce unimproved parcels, then the landowners should have adduced evidence to show:
·that a group of comparable sales existed;
·that group of sales went beyond sales of scarce vacant land;
·that on analysis the improved sales evidence proved that the level of unimproved value reflected by those sales did not support the level of unimproved value reflected by sales of the scarce vacant land."
[4] At [78].
The issue to be addressed in this case is whether the appellants have proved that the prices paid for the 3 vacant sales properties relied on by Mr Doyle reflect a premium because such land is scarce. In Maurici, the respondent conceded that sales of vacant land in Hunters Hill were scarce and that the valuer had valued the notionally unimproved subject land as if it also were scarce. No such concessions have been made in this case.
The first question is whether sales of vacant land in East Toowoomba at the relevant time were scarce. Mr Doyle provided details of 3 sales only, Mr Gatfield said there were 5. Two of Mr Gatfield's sales were not in East Toowoomba. While Mr Doyle accepted that there were not a lot of sales of vacant land in East Toowoomba, he considered that there were sufficient such sales to establish a market. Mr Gatfield, who is an experienced local real estate agent, has said that vacant land sales in the area were scarce. In the light of that evidence, and the fact that Mr Doyle relied on only three sales (one of which does not provide a good comparison with the subject) to support the valuation, I am prepared to find that vacant land sales in the prestige area of East Toowoomba were scarce at the relevant time.
The second question is whether it has been proved that the buyers of the vacant lots paid a premium for them. As was pointed out in Spender, the mere fact that vacant land is scarce does not automatically have the consequence that the buyer of such land pays a premium for it. Mr Doyle did not accept that a premium was paid for such land. He said that the improved prices for land in East Toowoomba show that the price paid for the land component in such sales stacks up with what people are paying for vacant land. However, Mr Doyle did not provide any details of improved sales to substantiate this assertion. Nor did Mr Gatfield adduce any evidence about improved land sales in the area.
If either party had analyzed a representative group of comparable sales of improved land in the relevant area, the value of the land component of such sales would be calculated. The land value thus established could then be compared with the prices paid for unimproved land, to establish whether a premium was paid for the scarce unimproved land. Neither party has done that.
As part of his submissions concerning the relationship between land size and sales price/m² (which is discussed below), Mr Gatfield produced a graph (graph No. 1) detailing the price/m² paid for 16 properties ranging in size from 598 m² to 2,570 m². Mr Gatfield said that one of the properties, 34 Grenier Street (1,654 m²), which sold for $320,000 or $193/m² was one of the four sales of a vacant property of similar size to the appellants. 34 Grenier Street is in the next suburb to the subject, is a level block and sold as vacant land in 2009 after the old house on it had burnt down. The sale was a corner block, which the purchaser was able to subdivide into 3 lots. The appellants' land did not have those advantages, Mr Gatfield said.
While it is recognized that vacant land sales of a comparable size to the subject were scarce, I do not consider that this sale should be relied on to value the subject. Grenier Street is not in East Toowoomba, and as set out above, I have accepted Mr Doyle's evidence that the prestige area of East Toowoomba constitutes a separate submarket. Mr Doyle said that the suburb in which Grenier Street is located is inferior to East Toowoomba. In my opinion, there was not sufficient evidence as to the comparative features of each suburb to enable the sale to be applied confidently. Further, as it appears that the Grenier Street property was sold for redevelopment, the sale does not provide an appropriate comparison with the subject which is valued under s 46 of the Act with the consequence that any subdivision of the subject or potential for subdivision is disregarded.
I am therefore faced with a situation where Mr Gatfield says the sale prices of vacant land reflect a premium for scarcity, but he has adduced no persuasive evidence to prove that. Mr Doyle says there was no premium and he referred to sales of improved properties, but gave no evidence of the details of such sales. In my opinion the evidence does not establish one way or the other whether a premium was paid for those sales. In those circumstances, the respondent has the benefit of s 169(3) of the Act which provides that the appellant has the onus of proof for each of the grounds of appeal. The appellants have failed to discharge that onus in relation to this issue and therefore the appeal made on that ground cannot succeed.
Relationship between land size and value per square metre
Mr Gatfield submitted that Mr Doyle had taken the sales at 2 Boyden Street and 1B Eleanor Street (Sales 2 and 1), which showed a sale price of $338/m² and allowing for a 10% differential in the market, Mr Gatfield said, Mr Doyle had then applied the amount of $300/m² across the majority of larger blocks in East Toowoomba. It made no sense, Mr Gatfield submitted, to use the premium price for a rare piece of land as a basis of valuation for all the blocks of land in East Toowoomba, especially the larger blocks of more than 1,000 m², where the compounding of $300/m² blew out to a point where many landowners could not afford to pay their inflated rate bills.
By comparison, Mr Gatfield said, 95% of the land sales in the suburb of Middle Ridge were under 800 m² in size, with a median price of $180,000 for 672 m² or $267.85/m².
Mr Gatfield submitted that the valuation of the subject should be made by applying the average increase for the whole of the Toowoomba market in the relevant period.
Mr Doyle's evidence was that in areas such as Middle Ridge where the lots are of a comparatively uniform size, people did talk about a rate/m² for residential land. However, he consistently and vigorously denied, in the witness box, that he had valued the subject land on a rate/m² basis. He said that he had compared sites with sites. I have accepted Mr Doyle's evidence in this regard and accordingly do not accept that the valuation under appeal was carried out in the way described by Mr Gatfield.
Mr Gatfield said that his investigations had shown that, in comparable locations, the sales between 2008 and 2010 indicated that the larger the land size, the cheaper the rate/m². The following table summarizes Mr Gatfield's details of two such sales -
Property Date of Sale Sale Price Area Rate/m² 34 Kara View Drive, Rangeville 3 April 2009 $430,000 4,334 m² $99.21 15 St Ives Court 15 July 2009 $340,000 1,896 m² $179.32
Mr Gatfield also included a graph of other sales during the 2008-2010 period which he said were in comparable locations. Mr Gatfield said that this graph showed clearly the larger the land size, the cheaper the rate/m². The only two exceptions were the sales at 1B Eleanor Street and 2 Boyden Street which, Mr Gatfield submitted, demonstrated that those sales were far above the market.
While it is true that Mr Gatfield's graph does appear to demonstrate a correlation between land size and sale price/m² (with the exceptions of 1B Eleanor Street and 2 Boyden Street), I have accepted Mr Doyle's evidence that it is not appropriate to value properties simply by comparison of the respective sizes of the properties. The valuation of land requires that all relevant features of the land be taken into account - the size, aspect, topography, location, shape of block, zoning etc. A comparison simply on the basis of area does not reflect proper valuation practice. Further, the properties identified in the graph (other than those in Eleanor and Boyden Streets) are in different areas from the subject and therefore cannot be described as comparable, in the absence of any evidence that they are comparable.
Mr Gatfield's second graph shows the site values of various properties in Burns Street (where the subject is located) and, to some extent, demonstrates a correlation between the size of a property and the rate/m². However that correlation is not carried through to the subject property or the property at 4 Burns Street both of which are over 1,000 m². Mr Gatfield's submission was that this showed that the subject valuation was defective as the value/m² of the properties over 1,000m² did not decrease with the increased size.
Again that submission does not take into account the various features of the properties in question nor the fact that the valuations have not been made on a rate/m² basis.
Relativity
Mr Gatfield said that the appellants' property is located close to the city centre on very low lying land which was not flooded in January 2011, but their property has flooded in the downstairs laundry and workshop, and water flowed under the home. The adjoining houses are of average quality with the properties on either side being in the $300,000 to $330,000 range. A block of units backs on to the rear boundary of the subject property and there are two other blocks of units in the street. Although the subject comprises four lots, it is unable to be subdivided because the back two lots are landlocked, he said. The house is listed on the Council's significant register which means it cannot be moved and any renovations must fit in with the character of the street.
Mr Gatfield submitted that his third graph showed that the site value of the subject land was completely out of relativity with established properties in similar locations and of reasonably comparable size. Mr Gatfield also said that the graph shows that the increase in value was not applied equally to everyone in the prestige area. While all of the properties identified in the graph are in East Toowoomba, Mr Doyle said that not all of them are in the prestige area of East Toowoomba.
The evidence given by both parties on the issue of relativity was not sufficiently detailed for me to conclude that the valuation under appeal is out of relativity with the information provided by Mr Gatfield in graph 3. While some of the properties are in the prestige area of East Toowoomba most of them are not. In any event, it is well recognized that, although it is desirable that valuations made for the purposes of the Act of comparable lands, should bear proper relativity to one another, the use of the principle of relativity should not be preferred to the exclusion of relevant (even if not ideal) sales evidence.[5] Mr Gatfield did not provide any persuasive sales evidence of comparable properties whether unimproved or improved, to establish that the valuation under appeal was wrong.
[5]Grahn v Valuer-General (1992) 14 QLCR 327 at 328, citing Fischer v The Valuer-General (1983) 9 QLCR 44 at 46.
Conclusion
Having considered the evidence and the parties submissions in this matter, I have come to the conclusion that no error has been established in the valuation under appeal. Accordingly, the appeal must be dismissed.
ORDERS
1.The appeal is dismissed.
2.The site valuation of Lots 10, 11, 20 and 21 on RP 16820 in the County of Aubigny, Parish of Drayton, as at 1 October 2010, is affirmed at Four Hundred and Forty Thousand Dollars ($440,000).
CAC MacDonald
PRESIDENT OF THE LAND COURT
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