Williams v Chief Executive, Department of Natural Resources
[1997] QLC 49
•4 April 1997
|
BRISBANE
4 April 1997
Re: Appeal against Annual Valuation -
Valuation of Land Act 1944 -
Valuation Roll No: 50421
Local Government: Gold Coast-Albert.
(AV96-94).
Victor O and Nell M Williams
v.
Chief Executive, Department of Natural Resources
(Hearing at Coolangatta)
D E C I S I O N
Background:
The key issues in this case relate to the comparison of comparable sales, the percentage increase in valuations, relativity, and the impact of flooding. The appeal related to a parcel of land at 23 Warrina Crescent, Burleigh Waters, Gold Coast, which is used for single residential purposes by the appellants, and is described as Lot 47 on RP 128431, with an area of 976 square metres. The land is zoned as "Residential A" in the Town Planning Scheme of the Gold Coast City Council, effective at the date of valuation at 1 January 1996.
The parcel is situated about 1.4 kms north-west of Burleigh Heads Town Centre, with shops, Post Office and banks. Surf beaches are located about 700 metres to the north-east, and schools are located within a 2 kilometre radius of the subject. Access to the property is via Warrina Crescent, a bitumen sealed road with concrete kerbing and channelling. The property contains a cleared, filled and retained residential block, hatchet shaped, with an access strip 4 metres wide and 20 metres long to Warrina Crescent. Overhead power, telephone, town water and sewerage is connected to the subject.
The parcel has a drainage "Easement A" across its northern boundary which is 2 metres wide, and power and telephone is connected to the dwelling via a private "property" pole and telephone pole along the 4 metre access strip from Warrina Crescent. The dwelling is listed in a flood prone area, which restricts flood cover insurance. There is a 1.8 metre high retaining wall along the northern boundary.
The Chief Executive, Department of Natural Resources, on 19 February 1996, issued a valuation for the property to the extent of $72,000. Following an objection, the Chief Executive, on 15 April 1996, disallowed the objection and confirmed the valuation at $72,000, against which the appellant has now appealed, and submitted that the valuation should be $53,000.
Mr VO Williams appeared for the appellants, calling his wife as a witness. Mr B O'Connor appeared for the respondent, calling Mr DR McKinnon, the Departmental registered valuer responsible for the valuation, which was originally determined by another valuer in the Department.
Evidence:
The appellants argued that the valuation had increased by 50% from $48,000 to $72,000, during which time the property market was reported to have only increased in the Burleigh Waters area by approximately 3%. The appellants also led evidence that showed that the Suncorp Insurance office had insured the dwelling at replacement cost to the extent of $105,000, noting also that flood cover was not included in the insurance cover.
In order to confirm the appellants estimate of the valuation, they sought the advice of professional valuers "Eccleston and Fraser", who submitted to Suncorp their estimate of the improved property, at $160,000. This figure was conveyed to the appellants by Mr Fraser verbally, who declined to place the estimate of the valuation in writing. In view of the inability to question Mr Fraser on the method undertaken during valuation for insurance purposes, the evidence of the quantum was accepted as hearsay only at this time.
Mr Williams then deducted the estimated insured value of the dwelling ($105,000) from the total improved value ($160,000) and determined, in his view, that the value of the land was $55,000, from which, after deducting other improvements, he determined the unimproved value at $53,000.
Mr Williams also provided evidence that newspaper articles had analysed and estimated the percentage growth in the improved property market at June 1996, for the period 1992 to 1995, for Burleigh Heads (3%) and Burleigh Waters (1.2%). This growth, he claimed, did not support the increases of 50% by the Chief Executive. He claimed that because of its less attractive location, the extent of filling on the site, the impact of flooding upon the subject, the restrictions imposed by the narrow access to the site, the extra costs for power and telephone installations, all impacted the value of the subject. He advised that because of the Gold Coast City Council's requirements in respect of building above the 1974 flood level, the dwelling, which was constructed in 1976, required an additional 8,000 bricks to raise it above the flood level. Under cross-examination, Mr Williams conceded that the value of the dwelling for insurance purposes at $105,000, did include the replacement condition, although Mr Williams contended that this would be very near to the actual depreciated cost of the building.
Mr Williams contested the relevance of using an analysis of sales of vacant land, rather than using sales of improved lands near to the subject. Mr McKinnon, on the other hand, offered a comparison of four vacant sales in the vicinity:
•Sale 1 -(1 Maitland Street, Burleigh Waters - Lot 42 on RP 137708). This is a smaller rectangular shaped corner lot located about 500 metres south of the subject, now being developed with new brick homes. The sale is zoned as "Residential A", has an area of 607 square metres. It is considered to be superior to the subject, although smaller in area, but has a superior shape, access and aspect. The sale sold in January 1994, for $105,000, which, after allowing $7,300 for filling, provided an analysed value of $97,700 which was then applied at $87,000.
•Sale 2 -(28 Whistler Drive, Burleigh Waters - Lot 2 on RP 219334).
This is a smaller rectangular shaped lot located about 1.3kms south-west of the subject, comprising cleared, filled, level land which is now developed with a brick home. The sale is considered superior to the subject, although smaller in area, with an area of 651 square metres, and is zoned as "Residential A". It is located further from the beaches than the subject, which has superior shape, access and aspect. The sale sold in June 1995, for $93,053 which, after allowing $7,800 for filling, provided an analysed value of $85,253, and an applied value of $78,500.
•Sale 3 -(3 Lutana Avenue, Miami - Lot 19 on RP 161651).
This is a smaller rectangular shaped lot located about 800 metres north-west of the subject, comprising a gently sloping cleared lot with north-easterly aspect to Nobby Head. Local shops are located across the road. The land is zoned as "Residential A". The sale is considered superior to the subject, as although located further from the beaches, is smaller in area at 613 square metres, but has superior shape and aspect. The sale sold in July 1994, for $113,500, which after allowing for improvements of $2,200, provided an analysed value of $111,300 and an applied value of $99,000.
•Sale 4 -(Christine Avenue, Burleigh Waters - Lot 157 on RP 852204).
This is a regularly shaped lot located about 1.4 kms south-west of the subject, and comprises a level, filled lot on a busy road. The sale is considered inferior to the subject due to its smaller area, distance from the beach and location on a busy road. The sale has a smaller area at 660 square metres, and is zoned as "Residential A". The sale sold in May 1995, for $82,000, which, after allowing $7,900 for improvements, provided an analysed value of $74,100, which provided an applied value of $68,000.
In considering these sales, Mr McKinnon saw Sale 1 as the most comparable to the subject. Mr Williams agreed that Sale 1 was superior to the subject, but argued that Maitland Street did not really compare as it has less rented properties than Burleigh Waters. In respect of Sale 2, the appellant believes this is a superior area because it has quality homes and newer underground utility services. In respect of Sale 4, Mr Williams argued that this was nearer to the University with higher quality properties, underground power in a new estate, and above flood level. He contested the detriment of location on a busy road, as he noted the road was a divided carriageway with parkside parking spaces, and a vegetation strip along the divider. He disagreed with Mr McKinnon that vehicles had greater difficulty entering the sale because of restrictions imposed by the median strip.
In respect of Sale 3, the appellant was unsure of the sale, but understood that better views were available from Sale 3 than the subject, which would increase the relative value of Sale 3. The appellant contested the relevance of the four sales which he claims provide no real comparison with the subject.
Mrs Williams gave evidence which confirmed Mr Williams' evidence, and in particular noted that adjoining six neighbours creates some tension on the subject, and the restricting impact of the narrow access strip to Warrina Crescent, particularly the parking of cars by visitors. She confirmed that the access strip was really part of the subject, and not an easement for access. The appellants confirmed that the specific disabilities of the subject included filling, the retaining wall, the power and telephone poles, the drainage easement across the rear, and the parking restrictions. Mr McKinnon confirmed that he was aware of all of those problems and had allowed for them in his analysis of the subject. He was also aware of the additional foundation costs which were required for the dwelling to meet the flood level requirements.
Mr McKinnon claims that in adopting an analysis of sales of vacant land, he has used the preferred method as established by the courts. He challenged the method adopted by the appellants in that from his experience, it is not sound to adopt replacement cost of a dwelling in determining unimproved value, unless the building is practically brand new. Generally, the value of the home is something less than the replacement cost. In some areas on the Gold Coast, homes about 20 years of age are sometimes being demolished to obtain a new building site. Mr McKinnon declined to value the existing dwelling as he had not fully inspected the dwelling, but he considered it would be valued at something less than $105,000.
In respect of the newspaper articles on the market trends, Mr McKinnon challenged their relevance in respect of the general nature of the statistical analysis, whether the growth represented median or mean values, and that the analysis referred to improved sales which was not the preferred method for determining unimproved values.
Mr McKinnon also argued that it is not a useful method to project percentage growth based on relativities in 1975, when the subject was purchased, between the subject and parcels in the near vicinity, in that for various reasons, relativities can vary over time. He noted that the valuation of $72,000 at 1 January 1996, was the same as the valuation for 1 January 1995. Mr McKinnon agreed that there had been a rise in the value of sales on the Gold Coast around 1994, but that values had stabilised over the 1995 and 1996 period.
In summary, Mr McKinnon gave evidence that he had made allowance for all disabilities impacting the subject. Mr Williams acknowledged that the disabilities had been acknowledged in the valuation but that insufficient amount had been allowed. Mr Williams confirmed that, in his view, the use of sales of vacant sites was not the best method of determining the unimproved value of the subject. The appellants also argued that the impact of the flood control measures of the Gold Coast City Council has had a significant impact upon the subject, in that there have been a need for filling and the additional foundations for the dwelling.
Decision:
In respect of the use of percentage growth in the marketplace to assess the valuation, I note that the newspaper articles to support the appellants' claim, reports research undertaken by the Real Estate Institute of Queensland. This research analysed the median house prices over the period from 1992 to 1995, and confirmed that the actual number of sales on the Gold Coast had a large base upon which to compare, and its growth therefore had not been as strong as the Sunshine Coast, where houses were generally more affordable than on the Gold Coast. The industry research forecast "steady growth during the next couple of years".
While growth trends have an attraction to the appellant in that they provide an easily understandable method of comparison, they suffer from the disadvantage of being too general in nature, and the statistics provide no in-depth analysis of the conditions of the individual sales themselves. For these reasons, it is very difficult to analyse the quantum of the variations in the value of the dwellings, and also in the unimproved value of the land.
There can be a tendency in such analyses of improved properties to underestimate the actual variation in the value of the dwelling, and to assume that most of the fall or rise in value is associated only with the land. In respect of this matter, I am drawn to the decision of the Land Appeal Court in O'Brien Nominees Pty Ltd v. The Valuer-General (1979) 6 QLCR 280 which held that in times of depressed economic conditions and low property sale prices, it was unrealistic to conclude that the land, the commodity basic to the enterprise, had a minus or nominal value and it was logical to assume that in times of adversity and depression, when purchasers paid less for properties as a going concern, the lesser price attached not only to the land component but also to the improvements.
Noting that relationship between the value of the dwelling and the unimproved value of the land, the Courts have consistently determined that the preferred method of determining unimproved value is by the comparison of sales of vacant land, if they are available within reasonable proximity to the subject. In this regard, I refer to the decision 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. "
This principle was also stated by the Land Appeal Court in R and MM Barnwell v. The Valuer-General (1990-91) 13 QLCR 13 at p.18:
"It is again well established that when valuing homesites, then the best method of comparison is on a site for site basis. "
And also in WM and TJ Fischer v. The Valuer-General (1983) 9 QLCR 44 at
p.46:
"The best basis for assessment of unimproved value is the use of sales of vacant or lightly improved parcels of land. "
In comparing the approaches adopted by the parties, I am drawn to the comparison of vacant sales as determined by Mr McKinnon. I note that Mr McKinnon has considered all the factors raised by the appellants in his determination of the valuation. While Mr Williams had differing views on the weight to be placed upon the sales evidence, he did not, in my view, discredit the sales for comparison purposes. I note that the parties are in agreement that Sales 1, 2 and 3 are all superior to the subject. In respect of Sale 4, while noting Mr Williams view that it was also superior to the subject, I believe he has not adequately considered the impact of the busy road, which was Mr McKinnon's conclusion. I believe Sale 4 is inferior to the subject for this reason. In assessing the quantum of the subject, I believe that Mr McKinnon's estimate at $72,000 has not been discredited.
In the matter of the alternative method of confirming the valuations, by using the valuation provided for insurance purposes, and then deducting the "insured value of the dwelling for replacement", I note Mr McKinnon's comments in respect of the difficulty of assessing the difference between the replacement cost of the dwelling and its depreciated value. This is the very matter that was identified in the Clough case, supra.
Summary:
In determining amendments or alterations to the valuation, the onus of proof rests upon the appellants, under section 33 of the Valuation of Land Act 1944:
"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 proven otherwise upon objection or appeal or until altered or further altered. "
In summary, I believe that the appellant has failed to demonstrate that the valuation determined by the Chief Executive is inappropriate.
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 Chief Executive's valuation at $72,000 is affirmed.
(NG Divett)
Member of the Land Court
0
0
0