Stay v Chief Executive, Department of Natural Resources
[1996] QLC 132
•27 September 1996
|
BRISBANE
27 September 1996
In the matter of an appeal against a valuation
Valuation of Land Act 1944
Valuation Roll No.: 20/01600
Local Government: Maroochy
(AV96-71)
DW & RL Stay
v.
Chief Executive, Department of Natural Resources
(Hearing at Maroochydore)
D E C I S I O N
This decision relates to an appeal under the Valuation of Land Act 1944 against the valuation of the Chief Executive on the subject land in the amount of $610,000, that is $310 per m² applied as at a relevant date of 1 January 1995. The appellants contend for a figure of $100,000.
One of the appellants, Douglas Wesley Stay a building contractor, appeared and gave evidence in support of the appeal. The Chief Executive led evidence through Maxwell John McLaren, a registered valuer in the employment of the Department of Natural Resources with considerable experience in valuing commercial properties in the Gold Coast area.
The subject land has an area of 1971 m² and is situated at the corner of Brisbane Road and Pangarinda Place Mooloolaba. The area was referred to by Mr. Stay as “Bundilla”. Brisbane Road is a major thoroughfare predominantly consisting of a four lane dual bitumen carriageway, with service road access to the side, in the area of the subject property. Access to the subject land is easy and direct from either a northerly or southerly direction along Brisbane Road though the northerly carriageway affords easier access. Rear access is provided through Pangarinda Place and into Coorumbong Close both of which are bitumen carriageways with concrete kerbing and channelling.
The subject land is situated within a substantial ribbon commercial centre consisting predominantly of retail shops, showrooms and offices. The land is zoned “Commercial” under the Maroochy Shire Town Plan which was gazetted on 14 December 1985. The subject land is currently developed as a single level retail complex and was viewed by Mr. McLaren as being suitable for commercial development if considered on an unimproved basis as is required by the provisions of the relevant act.
The appellants’ figure of $100,000 is based on the proposition that the site has a highest and best use of three residential lots, each valued in Mr. Stay’s view at about $33,000. Mr. Stay did not provide any basis for these suggested valuations. The subject land is not zoned for residential purposes and its situation on such a busy thoroughfare as Brisbane Road indicates to me that single lot residential usage would be quite inappropriate for the subject land. Mr. Stay mentioned that home unit development was taking place in the area and was slowly moving along Brisbane Road however, it was Mr. McLaren’s view that the home unit development was moving in a southerly direction but certainly not along Brisbane Road. Without seeing any need to settle this small point of disagreement, I have no hesitation in concluding that the highest and best use of the subject land is not residential but is commercial as indicated in Mr. McLaren’s valuation evidence.
Part of Mr. Stay’s reasoning in his approach to this appeal is based on the proposition that the Bundilla area is commercially depressed. He agrees that there has been substantial population growth in the Sunshine Coast area and that there has been commercial benefit from that growth, however, says that the Bundilla area remains in the commercial doldrums.
Mr. Stay said that when the shops on the subject land were built in 1983 Bundilla was a very viable area located on the main road between Caloundra and Maroochydore, however, when the highway was diverted in association with the construction of the Sunshine Tollway, Bundilla became a backwater. He added that increased competition from the Sunshine Plaza and an increase in the size of Kawana Shopping Town, exacerbated the situation.
Mr. Stay said that traffic counts on Brisbane Road around the relevant date were 27,000 vehicles per day and probably falling; however, Mr. McLaren gave evidence that the traffic count was 22,000 vehicles per day and was increasing at a rate of 6% per annum according to Department of Transport information. Apparently, local authority engineers have confirmed the vehicle count information recently as they had recourse to such data in designing pavement thickness for a proposed upgrading of Brisbane Road.
In support of his contention that the Brisbane Road area is depressed, Mr. Stay referred also to two failed auctions that he was aware of and to a number of vacant shops in the area. Apparently at these auctions no bids were made and whilst this is undoubtedly a matter for concern, it may indicate the nature or quality of improvements offered for sale or the marketing carried out or some other matter. Certainly, it is not a useful indicator for valuation purposes. According to Mr. Stay there are 32 to 34 shops vacant in Brisbane Road and in the adjacent portion of Nicklin Way, 23 of these being in the Bundilla area. Mr. McLaren agreed that there were a number of vacancies though thought Mr. Stay’s figures were a little high. Mr. McLaren suggested that some of the asking rents were above the indicated market. Given that Mr. Stay was apparently in error in calculating the number of vacancies in a sale that Mr. McLaren referred to and which I will come to later, it may be that his figures are somewhat high, however, this is not a matter of any great moment in view of the approach that I have taken in this case. I should add, however, that Mr. Stay and Mr. McLaren agreed that the absence of a national tenant to attract custom into the Bundilla area undoubtedly had an impact on retailing trade there.
Whilst in Mr. Stay’s view the changed traffic arrangements constitute the central cause of the downturn in the Bundilla area, Mr. McLaren painted the picture a little differently. He said that Bundilla is “an older area” and that commercial redevelopment is taking place in the corridor. The older developments are, not unexpectedly, not as attractive as the newer ones: a normal cyclical situation. Mr. McLaren also said that whilst car parking is available in Bundilla it is generally of poor design in that it is often at the rear of shops and therefore not visible to potential customers who frequently elect to park on the street creating a cluttered visage.
What I have set out above attempts to summarize the evidence concerning the environment surrounding the subject property: factual matters which may be of interest to intending purchasers; however, in the end it is not my task to take all of these factors and consider them to produce a valuation figure but to consider what the real estate market reveals in the form of prices paid for comparable lands. The case frequently referred to as the pre-eminent authority regarding the law of land valuation is Spencer v the Commonwealth (1907) 5 CLR 418 where in his judgment Griffith CJ said at 432:-
“In my judgment the test of value of land is to be determined, not by inquiring what price a man desiring to sell could actually have obtained for it on a given day, that is, whether there was in fact on that day a willing buyer, but by inquiring ‘What would a man desiring to buy the land have had to pay for it on that day to a vendor willing to sell it for a fair price but not desirous to sell?’ It is, no doubt, very difficult to answer such a question, and any answer must be to some extent conjectural. The necessary mental process is to put yourself as far as possible in the position of persons conversant with the subject at the relevant time, and from that point of view to ascertain what, according to the then current opinion of land values, a purchaser would have had to offer for the land to induce such a willing vendor to sell it, or, in other words, to inquire at what point a desirous purchaser and a not unwilling vendor would come together.”
Another useful case if found in Riverbank Pty Ltd v Commonwealth (1974) 48 ALJR 483 where the Court said that use of sales evidence was ‘the conventional valuation’ method and in this regard sales of similar land around the relevant date and in the same locality are clearly to be preferred.
In addition to sales evidence, the valuations placed on comparable properties by the Chief Executive might be referred to in support of a valuation, however it is necessary that, amongst other things, the basic properties referred to be comparable with the subject land. Mr. Stay referred to three properties, one in McGinn Road, another in Nambour and one in Alderley in Brisbane. Given the situation of these properties being remote from the subject land and also the fact that there was no clear comparison provided nor any evidence of the basis of the Chief Executive’s valuation, I cannot place any reliance on this evidence.
Mr. Stay referred also to certain Consumer Price Index calculations tendered in evidence comparing valuation increases with CPI changes, however, he did not seek to rely directly on this evidence. It would not assist me.
As the final limb of his appeal, Mr. Stay produced a capitalisation exercise which yielded a negative value for the subject land, as improved. The exercise was based on a partially let building with sub-market rentals and a capitalization rate of 13%, a figure which Mr. McLaren suggested related to an older building or less desirable tenancies. Apart from the difficulty of translating a capitalization of an improved site into an unimproved valuation exercise, I find the capitalization approach tendered by Mr. Stay to be flawed in principle. The capitalization method should only be used where, amongst other things, it values the highest and best use of the property. A negative result shows that this is not the case here.
In support of the Chief Executive’s valuation Mr. McLaren tendered evidence of three sales relied upon by him, together with two supporting sales.
Sale No. 1 involved an area of 1854 m² of land zoned “Commercial” which sold in May 1994 for a price of $650,000 analysed to an unimproved figure of $648,000, that is, approximately $349 per m². This sale had been applied by the Chief Executive to the sale land at $297 per m². The sale property is located on Brisbane Road, Mooloolaba, a short distance south of the subject land, has a good frontage and corner exposure and since purchase has been developed as four ground floor showrooms with two small offices on the first level. Mr. McLaren saw the sale property as being slightly inferior in quality overall to the subject land particularly having regard to the rear access which the subject enjoys and the subject’s superior frontage to area ratio. In referring to the matter of rear access, Mr. McLaren explained that it is preferable to have delivery vehicles accessing the rear of the land.
Mr. Stay is aware of Sale No. 1 and said that he would not have bought the land at the price paid by the purchaser as it “doesn’t stack up”. He gave evidence that the current property owner had put the site, as developed, to auction recently but had received no bids. Mr. McLaren referred to advice he received from a leasing agent who said that there were design problems associated with the developed showrooms on the site, particularly with regard to dark tinted glass windows which were probably more of feature for professional offices than for a showroom usage. The agent said that a marketing campaign was currently being launched directed at the professional office market. For his part, Mr. Stay suggested that replacement of the glass at a price of about $8,000 might be a feasible option.
Most importantly, Mr. Stay said that putting aside his concern with the prudency of the purchaser in buying the land in the first place that the sale was comparable with the subject land and in summary, he could see little between the blocks, saying that there was “much of a muchness” between them.
Mr. McLaren’s second sale is located on Brisbane Road between Sale 1 and the subject property, having sold in February 1993 for $232,500 unimproved that is $349.62 per m². The area of Sale 2 is 665 m² and the land is zoned “Commercial”. The Chief Executive applied the sale at a figure of $312 per m² and Mr. McLaren expressed the view that the sale property overall is comparable in quality to the subject land. He said that whilst the sale property has a marginally better frontage to area ratio than the subject land, the sale suffers from blind corner exposure to traffic which passes the sale and does not have the advantage of rear access. In Mr. Stay’s view, Sale 2 and the subject land are “roughly comparable”.
The third sale referred to by Mr. McLaren was of a commercial site in Brisbane Road located north of the subject land on the other side of Tuckers creek, having a area of 731 m². This sale at $252,000 took place in March 1994 and was analysed to an unimproved figure of $251,000 by Mr. McLaren, that is, $343.36 per m². This sale was applied by the Chief Executive at $288 per m². Following this sale, the property was resold for $280,000 apparently without further improvements being added, however, has since been developed into a two level commercial complex. In his valuation, Mr. McLaren wrote that he considered the sale property to be slightly inferior overall to the subject land largely because of the corner exposure and rear access enjoyed by the subject, however, these factors are offset somewhat by the superior frontage to area ratio of the sale. In reference to this sale, Mr. Stay said that the sale and the subject are “probably comparable”, though went on to suggest the sale may be a little more valuable than the subject given that the sale is closer to the home unit development which he said is “creeping down Brisbane Road”.
Mr. Stay sought to make a general criticism of the sales evidence on the basis that none of the purchasers fell into a category of purchasers well known to Mr. Stay: purchasers known to buy and develop land. This is not a criticism that I have had regard for it seems to me that without further direct evidence to challenge the transactions I should accept them as constituting market transactions uncoloured by any disqualifying feature. In my view the sales reveal clear consistency with each other.
The two supporting sales tendered by Mr. McLaren are located respectively in Kingsford Smith Parade and Maud Street, Maroochydore. In Mr. Stay’s view the Maroochydore area is two to three times superior to that of Bundilla though Mr. McLaren said that the asking rents are only marginally higher in that area than at Bundilla and are similar to the subject area in the case of the Maud Street sale. In answer to a question from Mr. Stay, Mr. McLaren said that he was unsure as to whether the Maud Street contract was conditional upon rezoning, an admission which suggests to me that it may be unsafe to place any dependence on that transaction as a basis. In fact, it seems to me that reference to these supporting sales is unnecessary in this matter as the weight of the evidence quite clearly supports the valuation of the Chief Executive. Accordingly, the appeal is dismissed and the valuation of the Chief Executive in the amount of Six Hundred and Ten Thousand Dollars ($610,000) is affirmed.
RP SCOTT
MEMBER OF THE LAND COURT
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