Sitte v Chief Executive, Department of Natural Resources
[1997] QLC 168
•17 October 1997
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BRISBANE
17 October 1997
Re: Appeal against Annual Valuation
Valuation of Land Act 1944
Valuation Roll No: 26195/10400
Local Government: Redland Shire
(AV97-246).
R and J Sitte
v.
Chief Executive, Department of Natural Resources
D E C I S I O N
Background:
This matter relates to land at 4 Seven Oaks Street, Alexandra Hills, Parish of Capalaba, and described as Lot 2 on RP 198381. The subject has an area of 6,001 square metres, and is located approximately 5 kms south-east of the Capalaba Post Office. The key issues are the comparison of sales of comparable properties, the percentage increase in the valuation, the method of determining the unimproved value, the impact of overhead powerlines and adjoining public housing.
The subject has good access to Seven Oaks Street which is part of a "Park Residential" estate with lot sizes averaging about 6,000 square metres. There is good access to Redland Bay Road which is a major connection road to the southern Bayside suburbs and the Capalaba Commercial Centre, and also to Old Cleveland Road which connects the Redland area and Brisbane CBD. The subject also has a small frontage to the Redland Bay Road, however the main frontage is to Seven Oaks Street. Town water, electricity and telephone are all available. The land is below the level of Seven Oaks Street and falls to the rear. The subject is used as a single housesite, and is part of an estate which has been developed with large good quality residences. Immediately to the west of the subject is a timbered Redland Shire Council reserve varying in width from 40 metres in the north to 135 metres fronting Redland Bay Road in the south. To the west of that reserve is the suburb of Alexandra Hills, a residential area comprising lots of size from 700 square metres to 1000 square metres. Some homes in the cul-de-sac immediately west of the reserve were built for public housing purposes for the Queensland Housing Department.
Across the rear of the subject are overhead electricity powerlines which are protected by registered Easement in Gross No 601716074 (E899183) on Easement A on RP 132448, covering approximately 30% of the subject. The subject is zoned as "Park Residential" under the Town Planning Scheme for Redland Shire of 20 February 1988, and effective at the date of valuation of 1 October 1996.
The Chief Executive, Department of Natural Resources, on 1 April 1997, issued a valuation at $110,000. Following an objection the Chief Executive confirmed the valuation on 21 July 1997, at $110,000. The appellants have now appealed that figure claiming the value should more properly be $90,000.
Doctor J Sitte appeared and gave evidence for the appellants; and Mr J Dewar appeared for the respondent, calling evidence from Mr GW Knight, Registered Senior Valuer responsible for determining the valuation.
Evidence:
Doctor Sitte claims that there is an inconsistency between the apparent increase in the value of sales of properties in the area, and the large increase in the unimproved value of the subject. He provided evidence from real estate industry sources which indicate that the "Median Housing Price Index" for Brisbane has shown that the prices being paid for houses have either been stable or in slight decline since 1992. During this period, by contrast, the unimproved value of the subject had increased from $75,000 to $110,000 (a rise of 46%).
In seeking to understand this large increase in the valuation, Doctor Sitte has sought to compare the subject with sales of other improved sites in the area and then to deduct the value of improvements in order to arrive at an unimproved value. This procedure he notes is in accordance with advice from the Department in its brochure which accompanied the posted notice of valuation. A recent valuation appraisal of the subject by a professional valuer had indicated that it had a value of approximately $200,000. Doctor Sitte believes that in assessing the value of the dwelling on either, a replacement cost basis, or after allowing for a reasonable rate of depreciation, the value of the dwelling would be more than the residual value of $90,000 if he was to accept the current unimproved value of the land at $110,000. Because of this inconsistency he claims that the Chief Executive has erred in his determination.
In response to those claims Mr Knight agrees that the market for improved sites in the area has been static or slightly depressed over the last few years. However he claims that there are two separate markets operating at present. The second market for vacant lots has in fact shown a steady increase during this same period. Mr Knight argues that in the range of prices for improved lots from $150,000 to $200,000, there have been problems in selling reasonably promptly. Once homes are dearer than $200,000, it becomes increasingly more difficult to sell because of the more limited extent of potential buyers. Mr Knight advises that in the nearby Victoria Park Estate, two year old improved homes on lots of approximately 2,000 square metres are currently selling for less than replacement cost.
However, Mr Knight provided evidence that recent sales of comparable properties in the area indicate that the market for vacant lots continues to increase. He provided the following sales of vacant lots which are all zoned as "Park Residential":
•Sale 1 - (Seven Oaks Street - Lot 7 on RP 234062)
This is a 6,036 square metre lot located approximately 0.5 kms east of the subject. The sale is a hatchet-shaped lot, located on a ridgeline falling gently to the north and with crossfalls to the east and west. The sale is seen to have similar area and zoning, inferior in shape and amenity, and does not suffer from the impact of overhead powerlines. Overall it is seen as superior to the subject.
The sale sold in June 1996 for $125,000, which after allowing for improvements, was analysed at $123,000, and applied at $115,000.
•Sale 2 - (Guyana Court - Lot 3 on RP 883583)
This is a 6,000 square metre lot located approximately 2.8 kms west of the subject. The sale is a regular rectangular lot, is level with the street and rises slightly to the rear, with a crossfall to the west. There is a registered easement for overhead power over the rear 40 metres of the sale. The sale is seen as similar in area, zoning and easement encumbrances, but superior in topography and is further removed from through-traffic noise. Overall the sale is seen as superior to the subject.
The sale sold in May 1996 for $127,000, which was analysed at $127,000, and applied at $120,000.
•Sale 3 - (Guyana Court - Lot 7 on RP 883583)
This is a 6,000 square metre lot, almost opposite Sale 2. The sale is a regular rectangular lot, level with the street and falls to the rear with a crossfall to the west. The sale is seen as similar in area, topography and zoning, and superior in that it is further removed from through-traffic noise, and is not impacted by an easement encumbrance. Overall the sale is seen as superior to the subject.
The sale sold in March 1996 for $127,000, which was analysed at $127,000, and applied at $120,000.
•Sale 4 - (Lyndon Road - Lot 4 on RP 201981)
This is a 5,001 square metre regular rectangular lot, located approximately 2 kms south-west of the subject. The sale has an elevated knoll adjoining the frontage, with a moderate to steep fall to the rear where there is a low-lying depression and watercourse along the rear boundary. The sale is seen as inferior in topography and situation because of Lyndon Road, which is a major connector dual carriageway road divided by an earth median strip. There is no easement encumbrances. Overall the sale is seen as inferior to the subject.
The sale sold in February 1996 for $113,000 which after allowing for improvements provided an analysed value of $111,000, and an applied value of $103,000.
Further matters of concern for Doctor Sitte are the impact upon the value of the subject as a consequence of the presence of the overhead powerlines across the land, and the presence of certain public housing lands to the immediate west of the subject. He acknowledges that the public housing is not an entire public estate but he advises that the current public housing residents generate noise levels which would deter prospective buyers of the subject. The location of the public housing is well known in the area as their original erection had caused a local protest from residents. He acknowledges that a treed public reserve provides a visual buffer from the public housing. In respect of the presence of the overhead power transmission lines, Doctor Sitte believes that the possibility of health impacts upon the subject would also weigh in the minds of prospective purchasers. As a professional physicist, he personally believes that there is not yet conclusive evidence that the powerlines are harmful, however public perceptions currently cast doubts in the marketplace.
In comparing Mr Knight's sales, Doctor Sitte claims that the sales are not directly comparable with the subject. While he agrees that comparison with vacant land is a logical process in valuing for unimproved purposes, Doctor Sitte however feels that it should also be compared with the alternative method of using improved sales, particularly as there is normally more sales of improved properties for comparison. Where there is a discrepancy between the two methods, he argues that the value should be determined in favour of the owner. Mr Dewar acknowledges that genuine uncertainties should be considered in favour of the owner, but claims that the Chief Executive has already achieved that purpose by applying conservative values to the subject.
In respect of any separate market for vacant lots, Mr Knight notes that his Sale 1 has subsequently been resold in 1997 for $132,000, supporting his opinion that prices have continued to rise for vacant land. He partly attributes this to the fact that at present there are no further proposals to develop land for "Park Residential" lots in that area. As a consequence of further limited supply of lots of that size, the market for "Park Residential" properties should remain buoyant.
In considering his Sales 2 and 3, Mr Knight notes that there is little difference in the nature of the land of both sales, and the prices paid for them were the same, although Sale 2 has an easement over part. As a consequence he claims that there is only minimal impact upon the value of lots of that size as a consequence of the overhead powerlines. In respect of the impact of traffic noise upon the subject, Mr Knight argues that he feels that noise levels would be similar near Redland Bay Road and Lyndon Road, but he claims that he has allowed for any possible impacts in his valuations anyhow.
Decision:
In considering first the percentage increase in the valuation, I note that Doctor Sitte has sought to compare a 46% rise in the unimproved value over a period of 5 years. I note that Mr Dewar has advised that the valuation has in effect risen from $100,000 (1 January 1996) to $110,000 (1 October 1996). While I am aware that such percentage rises in values are often of concern to appellants in seeking to have confidence that their personal property has been fairly treated in any valuation, they in fact do not prove conclusively that any error has been made in the valuation process. Such rises may, at best, be an indicator to owners that they should further investigate the valuation but there may be many reasons why a valuation has changed at what would appear to be a rate out of line with some overall statistical percentage.
This matter has been considered many times by the courts, and I note from precedents that a large increase in itself is not evidence of some error in the valuation. I note, for example, in the decision of NR and PG Tow v. The Valuer-General - Redland Shire (1978)(LAC) 5 QLCR 378, where the Land Appeal Court said at p. 381:
"It follows that a large increase over and above the previous valuation is in itself not a relevant issue provided bona fide sales of comparable parcels support the new valuation. "
That matter was also considered in CH and BD Henricks v. The Valuer-General (1983) 9 QLCR 59 where in the Full Court of Queensland, Macrossan J (C.J.) said at p.63:
"The appellants also relied upon a schedule, Exhibit 4 in the Land Appeal Court, which shows percentage increases in the value applied by the Valuer-General to a number of selected parcels of land from the date of the preceding valuation up to the March 1979 valuation date. The percentage increase shown in the selected case was in each instance considerably less than the increase applied to the subject land as between the two valuation dates. The weakness in such a selective comparison is obvious as there could be any number of reasons why blocks in the same valuation area should increase at different rates over a period of five years."
As the Full Court said, there could be many reasons why parcels of land can increase at different percentage rates over a period of time. The real test is not the percentage increase in the unimproved values, but a comparison of the subject with sales of comparable sites in the vicinity of the subject at the time of the valuation.
I turn then to the most appropriate method of comparing sales of comparable properties. I note that both parties agree that the preferred method is to compare sales of vacant lots where they exist within the vicinity of the subject. In this respect I note that Mr Knight has provided evidence that sales of vacant land are showing a different market trend to sales of improved sites. Both parties agree that sales of improved properties are stable or even in shallow decline. That Doctor Sitte has been unable to reasonably rationalise any differences between applying a determination using improved sales, to a value derived from vacant sales is really the key issue in this matter.
In seeking to compare the two methods, I look first at the determination of unimproved value using vacant sales. I note that this method has long be regarded by the courts as the preferred approach, and has been noted in many precedents. I note for instance in WM and TJ Fischer v. The Valuer-General (1983) 9 QLCR 44 where the Land Appeal Court said at p.46:"It is indeed a fundamental principle of valuation that the best basis for assessment of unimproved value is the use of sales of vacant or lightly improved parcels. "
The principle was also clearly defined by the Land Appeal Court in PH Clough v. The Valuer-General - Caboolture Shire (1981-82) 8 QLCR 70 (LAC) at p.76:
"It has been judicially laid down many times and in many jurisdictions that in ascertaining unimproved value, sales of unimproved land of comparable quality, situation, etc., to the subject parcel, if they are available, are to be preferred as the best guide for arriving at unimproved value. The reason is obvious. In applying such sales there is no room for error in analyzing the value of improvements.
Because there is less room for difference of opinion as to value of the various items of improvement and comparison is thus simpler, it has been held that highly improved sales should be avoided in preference to sales comprising a lesser degree of improvement".
I note also that Doctor Sitte argues that the valuer has applied a considerable level of subjective judgments in comparing the subject with the sales, which have different features and impacts, and that three of the sales are a significant distance from the subject. In considering whether Mr Knight has applied reasonable consistency in comparing the sales, I note the importance of a "fair and reasonable" analysis of sales. (See Valuer-General v. KA and LF Knuth and Others (1983)(LAC) 9 QLCR 142). However in examining Mr Knight's comparison I note in H and E Grahn v. The Valuer-General (AV89-246/7) 13 December 1990, unreported, where the Land Appeal Court said at page 5:
"A proper valuation calls for an exercise in balancing all the respective advantages and disadvantages inherent in or pertaining to a lot. "
In exercising his discretion I note that Mr Knight has drawn upon his knowledge and experience in accordance with precedent established in Bingham v. Cumberland County Council (1954) 20 LGR1, where in a minority decision Sugarmann J. said at page 18 and 19:
"In the absence of sufficient guidance to be had from sales, the valuer may find himself in a position resembling that to which Lord Romer referred in the Raja case (1939) AC at pages 312 and 313, in which he `will have no market value to guide him and that he will have to ascertain as best he may from the material before him what a willing vendor might reasonably expect to obtain from a willing purchaser for the land'.
The valuer in arriving at his opinion in these difficult matters may have to draw upon his general knowledge and experience, including perhaps experience in other situations which, although lacking in complete comparability, may yet provide an experienced valuer with guidance and suggestions as to the general approach which may be made and as to considerations which may become relevant. "
In the context of those directions, I believe Mr Knight has applied a reasonable level of care in comparing the sales, in view of the availability of comparable sales in the area.
I move then to the alternative method of valuing the subject by comparison with sales of improved properties. As noted by Mr Knight this is often referred to as the "summation or cost method" of valuing the land. I note that the "summation" method is commonly used for valuing house properties, where any comparison of other direct sales are not relevant. (See Land Valuation and Compensation in Australia by RO Rost and HG Collins, Third Edition, Reprint 1996, page 106). That text also confirms that the preferred method is to compare the subject with sales of vacant land, but if sales do not exist, the "summation" method involves: "an addition of the values of the constituent parts of a property to arrive at its total value". Precedent for use of the "summation method", is found in Seatainer Terminals Ltd v. The Valuer-General (NSW)(1974) 29 LGRA 6. The "summation method" was also examined by Sugarman J. in Marcus Clark & Co Ltd v. Commissioner for Railways (1949) 29 LVR 98. His Honour considered the method when it was used as a check for the purpose of comparing a valuation arrived at by another method, a situation similar to the current matter before us. Sugarman J. noted at page 137:
"The defects of the method do not need elaboration. As a method of comparison it appears to be less reliable than comparison of rates of capitalisation, notwithstanding the difficulties, already discussed, involved in the last mentioned procedure." (See also The Law Affecting Valuation of Land in Australia, 2nd Edition, Alan Hyam, page 111).
In seeking to apply the "summation" method to the subject, Doctor Sitte relies on a valuation provided by a professional valuer of the total value of the improved site at $200,000. The difficulty he then experiences is in determining the value of the improvements to be subtracted from that figure. He understands that the value of improvements is not the replacement cost of the building, but seeks to apply some depreciation factor in order to arrive at a depreciated value. In arriving at that figure, he finds difficulty in accepting that much of the decline in value of the total property may be attributed to the decline in "added value" of the dwelling. He therefore concludes that much of the fall in value must lie in the value of the land.
In this respect however I note that difficulties have been previously found in similar circumstances where appellants have sought to conclude that most of a decline in value should relate to the land and not to the improvements. In this regard I note in O'Brien Nominees Pty Ltd v. The Valuer-General (1979) 6 QLCR 280 at page 284:
"The basic properties have sold at prices considerably below the value of the improvements assessed on the traditional method of replacement cost less accrued depreciation.
In such circumstances it is unreasonable to conclude that land, the commodity basic to the enterprise, has a minus or nominal value. It is logical to assume that in times of adversity and depression, when purchasers pay less for properties as a going concern, that the lesser price attaches not only to the land component but also to the improvements. The question facing valuers in analysing improved sales in these circumstances is what value is fairly to be attributed to the improvements?
It appears to us that the only tenable approach is to abandon the traditional method of replacement cost as at sale date less depreciation, and to adopt an `added value' concept. "
The difficulty for Doctor Sitte in this matter is to determine the "added value" of the improvements. As Mr Knight suggested in evidence, the appropriate method of determining the value of improvements would be to compare the value of the land with other sales of vacant land, and to deduct that figure from the total value. Because of these uncertainties, where sales of vacant land exist, they are preferred in determining unimproved value.
I move then to Doctor Sitte's claim of an apparent inconsistency between the two methods and note Doctor Sitte's conclusion that a second method should be used to check the reliability of the comparison of vacant sales. In this regard I note that precedent could be claimed by the appellant in Minister of State for the Navy v. Rae (1945) 70 CLR 339, where Dixon J. said at page 344:"In reaching a conclusion as to compensation for the taking of a piece of property such as that now in question, it is necessary, or at all events wise, to pursue as many means of estimation as are open, to compare them and then, as an exercise of judgment, to fix what, upon considerations of this process suggest, appears to be a fair compensation. "
However, in that matter, which involved compensation for the requisition of a ship during wartime, there were special difficulties and it was decided to adopt as many means as possible to arrive at the compensation. In the current matter there are no such difficulties, and the use of an alternative method with all its inherent difficulties, is not warranted.
I turn then to the matter of the impact of overhead powerlines across 30% of the subject. I note that Doctor Sitte, as a professional physicist, is not conclusively convinced of the evidence of detriment to health as a consequence of the electrical fields impacting the site. However, I entirely agree with him that what is important is really the perception in the minds of potential buyers where public debate currently places uncertainty on that issue. However, I also note the conclusions of Mr Knight in respect of Sales 2 and 3, that any impact is reasonably small. In the absence of any further evidence on that matter, I must conclude that Mr Knight has adequately allowed for any such impact upon the subject.
In the matter of whether the presence of certain public housing west of the subject, has any adverse impact, I also find a lack of conclusive evidence. While it may be a matter of concern to the residents near the subject, this Court has no conclusive evidence to suggest that there is a difference generally between residents of private or public housing. It is worth speculating that there are both good and bad residents in both public and private houses, and any broad generalisation correlating public housing, without proof, does not assist me in this matter. I am also aware that when valuing properties, the Chief Executive takes no notice of the ownership of the properties. I also note that the subject has been valued as a single homesite, due to its current zoning, and there has been no provision considered in respect of any higher use of the subject. (See s.17 of the Act).
In respect of Doctor Sitte's claim that any difference in the two methods of valuation should be determined in favour of the appellant, I note that there is precedent for that approach in the High Court case in Commissioner of Succession Duties (SA) v. Executive Trustee and Agency Company of South Australia Limited and Others (High Court) 74 CLR 358 (1946-47), where Dixon J. said at page 373:"I have had the advantage of reading the judgment prepared by Williams J. and agree in it. I should like, however, to add for myself that there is some difference of purpose in valuing property for revenue cases and in compensation cases. In the second the purpose is to ensure that the person to be compensated is given a full money equivalent of his loss, while in the first it is to ascertain what money value is plainly contained in the asset so as to afford a proper measure of liability to tax. While this difference cannot change the test of value, it is not without effect upon a Court's attitude in the application of the test. In a case of compensation doubts are resolved in favour of a more liberal estimate, in a revenue case, of a more conservative estimate. "
However, in the current matter I believe the perceived valuation by Doctor Sitte using the "summation" method was flawed, and in any case, the respondent has already sought to provide a conservative quantum of valuation, thus supporting the principle outlined by Dixon J.
In making his comparisons, Mr Knight has provided three sales that are superior, and one sale which is inferior to the subject. The applied unimproved value of the subject should therefore lie in the range from $103,000 to $120,000. Considering the features of the subject, there is no reason to conclude that Mr Knight has not applied an appropriate unimproved value for the subject at $110,000.
Summary:
Under s.33 of the Valuation of Land Act, the onus of proof rests upon the appellant to prove his case:
"33.Any and every valuation, or alteration of the valuation, of any land made, or purporting to be made, under this Act by the chief executive shall be deemed to be correct until proved otherwise upon objection or appeal or until altered or further altered."
That is further clarified by s.45(4) of the Act which establishes:
"45(4)Such notice shall state the grounds of appeal and the appeal shall be limited to the grounds so stated and the burden of proving any and every such ground shall be upon the owner. "
In the current matter, I believe the appellants have failed to prove their case and have therefore not satisfied the onus of proof that the Chief Executive has made an error in his determination.
Conclusion:
After having considered the whole of the evidence, I am not persuaded that the appellants have proved their case. The appeal is dismissed and the unimproved value of Lot 2 on RP 198381, as determined by the Chief Executive, Department of Natural Resources, in the sum of one hundred and ten thousand dollars ($110,000) is affirmed.
(NG Divett)
Member of the Land Court
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