Ow v Valuer General
[2012] NSWLEC 1107
•02 May 2012
Land and Environment Court
New South Wales
Medium Neutral Citation: Ow v Valuer General [2012] NSWLEC 1107 Hearing dates: 29 and 30 March 2012 Decision date: 02 May 2012 Jurisdiction: Class 3 Before: Miller AC Decision: (1)The appeals are allowed.
(2)The land values under s 6A(1) of the Act are determined at $25,700,000 at the base date of 1 July 2008 and $22,500,000 at each of the base dates of 1 July 2009 and 1 July 2010.
(3)The respondent is to amend the Register of Land Values to reflect the land values determined.
Catchwords: VALUATION OF LAND Legislation Cited: Valuation of Land Act 1916 Category: Principal judgment Parties: Mr C K Ow (Applicant)
Valuer General of New South Wales (Respondent)Representation: Mr H El-Hage (Applicant)
Mr M R Hall (Respondent)
Crown Solicitor's Office (Respondent)
Parry Carroll Lawyers (Applicant)
File Number(s): 30668, 30669 and 30670 of 2011
Judgment
Mr C K Ow is the owner of the property, 38B The Crescent, Vaucluse (the subject property).
He has lodged appeals against the land values issued by the Valuer General as at the base dates of 1 July 2008, 2009 and 2010 under s 6A(1) of the Valuation of Land Act 1916 (the Act). Under s 40 (2) of the Act he bears the onus of proof.
Land value is defined in s 6A of the Act in the following terms:
(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 bone-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) Notwithstanding anything in subs (1), in determining the land value of any land it shall be assumed that:
(a) the land may be used, or may continue to be used, for any purpose for which it was being used, or for which it could be used, at the date to which the valuation relates, and
(b) such improvements may be continued or made on the land as may be required in order to enable the land to continue to be so used, but nothing in this subs prevents regard being had, in determining that value, to any other purpose for which the land may be used on the assumption that the improvements, if any, other than land improvements, referred to in subs (1) had not been made.
Land improvements are defined in s 4 of the Act and mean:
(a) the clearing of land by the removal or thinning out of timber, scrub or other vegetable growths,
(b) the picking up and removal of stone,
(c) the improvement of soil fertility or the structure of soil,
(d) the restoration or improvement of land surface by excavation, filling, grading or levelling, not being works of irrigation or conservation,
(d1) without limiting paragraph (d), any excavation, filling, grading or levelling of land (otherwise than for the purpose of irrigation or conservation) that is associated with:
(i) the erection of any building or structure, or
(ii) the carrying out of any work, or
(iii) the operations of any mine or extractive industry,
(e) the reclamation of land by draining or filling together with any retaining walls or other works appurtenant to the reclamation, and
(f) underground drains.
Land values
The base date valuations issued by the Valuer General were as follows:
1 July 2008
$24,900,000
1 July 2009
$26,700,000
1 July 2010
$27,400,000
The contended land values before the Court were:
Mr Ow
Valuer General
1 July 2008
$20,000,000
$28,500,000
1 July 2009
$17,500,000
$25,000,000
1 July 2010
$17,500,000
$25,000,000
Registered Valuers, Mr G Parsons and Mr D Hill gave evidence on behalf of Mr Ow and the Valuer General respectively.
Description
In their joint report the Valuers agreed on the following matters concerning the subject property:
9. The property identified as Lots 1 and 3 in Deposited Plan 518732 and Lots 1 and 2 in Deposited Plan 582674 at Vaucluse within the Local Government Area of Woollahra, Parish of Alexandria in the County of Cumberland.
10. The land has a total site area of 3,506 square metres.
11. The approximate dimensions of the site are 32.8/HWM irr x 89.55/73.67.
12. The subject land is irregular in configuration and slopes down steeply in a north westerly direction. As at the relevant base dates the subject land was terraced in generally three sections.
13. The fall of the subject land is 14 metres from the driveway at the eastern boundary to the pool area at the western boundary.
14. Attached to the lands waterfrontage rear boundary is an MSB lease area of 150 square metres.
15. The land contains an underground easement for sewerage purposes affecting part of the land. The easement is 10 foot wide and variable.
16. From an aerial view it is apparent that the southerly located properties have developed over this same easement that affects the subject property. The building works includes swimming pool improvements as well as outdoor landscaped areas and in one instance part of a house. Please refer to the annexure for this aerial view.
17. After a review of the adjoining building development over this same easement it is considered that the easement does not sterilise or inhibit all building development on the land. It is acknowledged that the easement does not have an effect on the subject land value involving additional engineering expense and building expense and that a hypothetical purchaser would prefer that this easement was not in place.
18. The subject land adjoins Sydney Harbour and has extensive harbour views of Parsley Bay, north westerly views to Mosman, north westerly views to Middle Head and Sydney Harbour National Park headlands with limited Sydney CBD skyline and Sydney Harbour Bridge views.
19. As at each of the relevant base dates attached to the subject land was a NSW Maritime Lease, No. 156, comprising an area of 150 square metres. The maritime improvements comprised a wooden wharf with an attached brick and concrete building for boatshed and ancillary uses.
20. As at the relevant Base Dates the subject land was zoned Residential "A" in accordance with the Woollahra Local Environmental Plan 1995.
21. The minimum allotment area is 675 square metres.
22. The maximum height limit on the land is 9.5 metres.
23. The subject property is not listed as an individual heritage item under the relevant planning instrument nor is it listed under Schedule 1 of the State Heritage Register.
24. The subject property is located within the Harbour Foreshore Scenic Protection Area whilst the land is subject to a 12 metre Foreshore Building Line.
25. As at the relevant Base Dates the building improvements upon the subject land comprised a two - three storey freestanding rendered brick waterfront residence with pitched tile roof designed in a neo Georgian style. There is a separate detached brick and tile building used for garaging.
26. Other building improvements on the land comprise a tennis court, driveways, swimming pool and extensive landscaping.
27. Land improvements comprise sandstone and concrete wall systems to terrace sections of the land.
28. Valuations as per Section 6A of the Act are based upon the assumption that the land is vacant, i.e. the improvements are notionally removed.
29. The term "improvements" does not include "Land Improvements" as defined under Section 4. In particular the levelling of sites are land improvements and remain as part of the land value.
30. The assessment of land value has been based upon the direct comparison method of valuation. Adjustments have been made from the sales analysis to that of the subject land for comparability purposes.
34. As at the relevant base dates it is considered the highest and best use of the subject land is a single freestanding waterfront residence.
The Court accepts the Valuers' agreement in respect of these matters.
Additional agreed items
Based on the evidence presented, the Valuers also agreed on the following additional matters:
- Land values declined from 1 July 2008 to 1 July 2009. Mr Parsons maintained that land values declined during that 12 month period by 12.5% while Mr Hill adopted a figure of 12.28% in his valuation report but in oral evidence changed his opinion to 15%. I prefer Mr Parsons' evidence on this particular point.
- Land values remained static from 1 July 2009 to 1 July 2010.
- The retaining walls on the subject property are land improvements. The value of these improvements are treated by both Valuers as being subsumed into the land value. For this reason they do not need to be separately valued.
- The area subject to the New South Wales Maritime lease is to be treated as part of the subject land and as if held in fee simple.
- The harbour foreshore of the subject property is rocky in the nature.
- On the required assumption that the existing improvements, except the land improvements, have never existed the ideal location for any new residence, having regard to the harbour foreshore building line, the sewerage easement as well as the importance of maximising views from the new residence, is where the existing residence is currently situated.
- There is a demand for large sites having an area two or more times as large as typical house sites on which there is or can be constructed single freestanding residences particularly in Vaucluse and Bellevue Hill. These large sites afford the owners/occupiers a sought after level of privacy and security.
- Views to the West, from Vaucluse and Bellevue Hill, encompassing the Harbour, Harbour Bridge, Opera House and city skyline were described by the Valuers as "iconic" and are much preferred to other harbour and ocean views.
Approach to valuation
The two Valuers considered and analysed a comparatively large number of property sales which they considered to be comparable, in the valuation sense of that word, in Vaucluse, Bellevue Hill and Watsons Bay. None of those comparables are directly comparable to the subject property.
Adjustments, of varying magnitude, are thus necessary to reflect location, land area, the value of improvements, topography and special features including water frontage or absence thereof and the nature of views available. It is axiomatic that the greater and the larger the number of adjustments to comparables will impact adversely on their evidentiary value.
As a starting point it is often helpful to set the parameters of the land value for the property to be valued.
18 - 20 Carrara Road Vaucluse
I found the sale of this property to be of assistance in setting what may be regarded as a minimum land value for the subject property.
This property is described by Mr Parsons in the following terms:
"A large residence on a double block that was substantially refurbished since its purchase for $22,300,000 in 2006. [It] enjoys a wide frontage to the harbour and excellent harbour views to the city, Harbour Bridge and Opera House."
It does not have a waterfrontage but adjoins a reserve which extends to the harbour waterfront. This reserve is rocky in nature. The property has no potential for MSB facilities.
This property was sold for $26,750,000 on 6 May 2010. It has a land area of 1603 m²; a little less than 50% of the area of the subject property. Mr Parsons has analysed the sale price and arrives at a deduced land value of $19,250,000. Having regard to the size of the subject property, the quite different harbour views available and the fact that the water frontage can be utilised I have come to the conclusion that its land value must be in excess of $19,250,000 as at 1 July 2010.
23 - 25 Coolong Road Vaucluse
This is a heritage-listed property that includes, what is said to be, Sydney Harbour's largest private beach. The land area is 3995 m² - nearly 500 m² larger than the subject property. It has a wide north east aspect. MSB waterfront facilities are provided.
This property was sold for $45,000,000 by contract dated 9 September 2008. Mr Parsons analyses a deduced land value of $37,000,000 while Mr Hill calculates a deduced land value of $38,500,000.
I consider this property to be significantly superior to the subject property. The deduced land value of $38,500,000 sets a maximum figure for the subject property.
54 - 56 The Crescent Vaucluse
I have come to the conclusion that this is the most comparable property from which the land value can most reliably be determined. It is located approximately 130 m east of the subject property. Mr Parsons describes it in the following terms:
"The property is an absolute water frontage residence, directly on Kutti Beach with views over Sydney Harbour. One of only five beachfront properties in Sydney's eastern suburbs with tennis court and boat shed.
It features a sheltered northerly aspect, a choice of indoor and outdoor living and entertainment areas, large office with separate entrance and a home cinema. ... It occupies an elevated position overlooking the beach and harbour. The beach frontage to Kutti Beach is highly prized."
In addition to its frontage to The Crescent the property also has a frontage to Wharf Road from which vehicular access is available.
The land has a total area of 1597 m². The fall from The Crescent to Kutti Beach and to the waterfront of the subject property are similar. However, a significant feature is that the land narrows from a point approximately one-third distant from The Crescent to arrive at a comparatively narrow frontage to Kutti Beach where a small boat shed has been constructed enabling a dinghy or other light boat to be stored therein.
The property was sold on 3 March 2011 for $17,750,000. Mr Parsons considers the added value of the improvements is $7,500,000 resulting in a deduced land value of $10,250,000. In circumstances where the development potential of the land is dependent upon its area, it is correct to analyse and value same on a dollars per square metre basis. In this case the potential development of the subject property and the comparables are not dependent upon its area so a lump sum comparison is appropriate. The analysis was not challenged by Mr Hill. The Court accepts the analysis. No evidence was submitted that property values had changed between 1 July 2010 and 3 March 2011.
Three adjustments to the deduced land value need to be made. The first is to reflect the fact that the subject property is 2.2 times larger than this property. On a pro rata basis the land value of the subject property becomes $22,500,000. This figure needs to be discounted to allow for the larger area of the subject property and the different market in which it is placed. I consider that a discount of 20% is appropriate. Thirdly, allowance must be made for the considerably larger water frontage of the subject property and its regular shape which improves building design flexibility. In my opinion an allowance substantially in excess of 10% would be appropriate. I have adopted a figure of 20%. The second and third adjustments balance each other.
On the basis of this comparison the subject property would have a land value, as at 1 July 2010 of $22,500,000. This figure would also apply as at 1 July 2009 and making the adjustment for the decline in the land value of 12.5% between 1 July 2008 and 1 July 2009 the calculated figure as at 1 July 2008 becomes $25,710,000 which I have rounded to $25,700,000.
52 The Crescent Vaucluse
This property was sold on 4 March 2011 (one day after the sale of the adjoining property) for $15,550,000. It is a rectangular shaped block, with frontage to Kutti beach, and an area of 1,026m2. Mr Parsons' uncontested deduced land value is $10,500,00. I prefer Mr Parsons' analysis of the sale of 54-56 The Crescent as the starting point for the valuation of the subject property because the land area of this property is 50% larger at 1,597m2.
93 Victoria Road Bellevue Hill
Mr Hill considered that this property could be classed as a comparable. This property has an area of 4097 m² and was sold for $23,000,000 on 5 November 2009. Subsequent to the sale a development application was lodged with Woollahra Council to demolish a building on adjoining land (subsequently purchased) and to undertake alterations and additions to the main residence. Mr Hill states:
"The land is a battleaxe site... very irregular in shape and the land is level and terraced, contains slight to moderate falls in areas as well as steep rock escarpments. The land obtains views in a northerly direction to Rose Bay, Sydney Harbour and towards the east to the Pacific Ocean."
Mr Hill considers that the added value of improvements was $2,500,000 indicating a deduced land value of $20,500,000.
This property and the subject property are very different. The Victoria Road property does not have a water frontage but is situated in a setting affording privacy and security with extensive views to the east, north and south. Taking all features into account I have concluded that the subject property must be more valuable by at least 10% indicating, on this analysis, a land value for the subject property as at 1 July 2009 of $22,550,000.
40 Wentworth Road Vaucluse
Both Valuers considered this property as a comparable sale.
Mr Parsons only analysed the original purchase while Mr Hill incorporated into his analysis the purchase of two adjoining properties, namely, 47 and 49 Vaucluse Road. These two properties increased the site area by 989 m². Based on the sales history of 47 Vaucluse Road and the price paid for 49 Vaucluse Road it is apparent that the prices which Mr Hill took into account were inflated due to the special interest of the adjoining owner. For that reason I consider it is only appropriate to analyse the original purchase which related to an area of 2365 m² including a frontage to Vaucluse Road which is at a much lower level. The price paid was $18,000,000; the sale date being 12 June 2009.
Mr Parsons describes the property in the following terms:
"An imposing and significant residence designed by renowned establishment architect Guilford Bell and completed in 1972... located opposite Strickland House and gardens. The broad nature of the land (approximately 74 m) afford 180° views to the Harbour Bridge, Opera House and the city skyline."
In September 2010 development approval was obtained to demolish the buildings constructed on the land fronting Vaucluse Road and to undertake major alterations and additions to the main residence on the originally purchased and comparatively level area fronting Wentworth Road. A substantial building was under construction on the Vaucluse Road frontage at the time of the view.
I accept Mr Hill's estimate of the added value of improvements of $1,500,000. Notwithstanding Mr Hill's allowance of $40,000 for demolition (which amount I considered not to be material) I have adopted a deduced land value of $16,500,000.
The subject property is 1.48 times larger than the area originally purchased. On a pro rata basis the land value of the subject property becomes $24,460,000. The property sold has unrestricted "iconic" views but does not have a waterfrontage. I have come to the conclusion that the benefit of the "iconic" views, the location in Wentworth Road, the level nature of the main part of the originally purchased site and a double street frontage more than outweigh the benefits of the waterfrontage of the subject property necessitating a deduction of 10% indicating a land value for the subject property of $22,014,000 at 1 July 2009.
Property sales in Watsons Bay
Mr Hill considered that the sale of two waterfront properties at 20 - 22 Pacific Street Watsons Bay (to a local resident from vendors who were not aware of the fact that the purchaser was the same) for a total price of $24,900,000 by separate contracts dated 17 October 2008 were directly comparable to the subject property when considered together. He also submitted that the sale of two adjoining properties at 23 and 25 Victoria Street Watsons Bay on 28 August 2008 for $28,100,000 and on 17 January 2009 for $16,000,000 respectively were closely comparable to the subject property. These latter properties have a frontage to Camp Cove Beach.
In my opinion the sales that I have identified earlier in Vaucluse and Bellevue Hill have the particular advantage of being either in the same suburb or a more closely related suburb and provide more reliable comparable sales evidence. For this reason I have discarded the Watsons Bay sales.
Valuation conclusion
The applicant has discharged the onus of proof in demonstrating that the issued base date valuations were too high.
Orders
The orders of the Court are as follows:
(1) The appeals are allowed.
(2) The land values under s 6A(1) of the Act are determined at $25,700,000 at the base date of 1 July 2008 and $22,500,000 at each of the base dates of 1 July 2009 and 1 July 2010.
(3) The respondent is to amend the Register of Land Values to reflect the land values determined.
E Craig Miller
Acting Commissioner of the Court
Decision last updated: 03 May 2012
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