Wright v Chief Executive, Department of Natural Resources

[1999] QLC 51

[1999] QLC 51

 

LAND COURT,

BRISBANE

26 May 1999

Re:     Determination of Unimproved Value –
  Valuation Roll No:  13698
  Local Authority:  Maroochy
  AV98-320.

Robert A and Judith M Wright

v.

Chief Executive, Department of Natural Resources

D E C I S I O N

This is an appeal against the determination by the Chief Executive of an unimproved value of $300,000 for a “Residential B” zoned site which is more particularly described as Lot 424 on Plan P93116, Parish of Maroochy, County of Canning, containing an area of 546 square metres. The land is a beachfront site situated at 18 Shearwater Street, South Peregian Beach, about 12 kms south of Noosa Heads and 5 kms north of Coolum Beach. The land is improved with a single unit dwelling and has been valued by the Chief Executive under the provisions of section 17(1) of the Valuation of Land Act 1944 as a single dwelling house site. The relevant date for the determination of the unimproved value is 1 October 1997. The appellants contend within the notice of appeal for an unimproved value of $255,000.
           Evidence in support of the grounds of appeal as contained within the notice of appeal was provided by Robert Angus Wright who is a civil engineer resident in Melbourne.  The grounds of appeal read:

“1.The Chief Executive has based his appraisal on the sale of Lot 422 placing a low value on the existing improvements on the grounds that these were mostly demolished and were of little value for that reason.  We believe this approach is not soundly based as the situation represents a transient state of development.

6.We argue that until this development is complete and sold the unimproved property value of all allotments with relativity should be based on the improved value of Lot 422 less the value of the site improvements which existed at the time of the last sale.  We expect this process, properly conducted, to lead to a lower value than that currently proposed by the Chief Executive.

6.We also argue that the new development of Lot 422 is speculative and it may be some years before a similar undertaking occurs again in Shearwater Street, or the property is sold at a profit.  Because of this the increase in value of Shearwater St beachfront allotments should proceed at a more conservative rate.

6.We also argue that the significant valuation increase which has been applied to Shearwater Street beachfront properties when compared with the valuation increase in other Shearwater St properties, brings into question the uniformity of the valuation process.  We argue that to ensure uniformity a more conservative approach is required which requires the continued application of the minimum unimproved value.

6.We argue that property values in Shearwater Street should be determined by sales in Shearwater Street.

6.Because of the potential future benefits which can be expected with a development with both sea views and beachfront proximity we argue that a premium has been paid for the purchase of Lot 422.”

Mr Wright describes Shearwater Street as having some 13 beachfront allotments (of which the subject is one) which are separated from the beach by a low-lying area with substantial banksia trees and other vegetation.  This area is 100 metres wide.  These beachfront allotments have all been developed under planning restrictions which limit the height of development so that as the trees in the low-lying area grow, the sea view from most properties has disappeared.

In support of grounds 1 and 2, Mr Wright provided the Court with details of sales in Shearwater Street, beachfront property sales, during the period 1 October 1996 to 1 October 1997.  Details are:

No 22 (Lot 422) – 546m² - sold on 4.12.96 for $470,000 – apportionment – improvements $200,000 – unimproved value $270,000.

Mr Wright informed the Court that this sale land has erected upon it a home of two storeys.  It was purchased for redevelopment into three storeys providing sea views from the upper levels.

No 12 (Lot 427) – 564m² - sold on 30.1.1997 for $420,000 – apportionment – improvements $130,000 – unimproved value $290,000.

No 10 (Lot 428) – 577m² - sold in August 1997 for $380,000 – apportionment – improvements $70,000 – unimproved value $310,000.

Mr Wright told us that this sales information was provided by Keith Gorrie Real Estate (Mr AJ Olarenshaw) and Mr Olarenshaw advised him that the apportioned value of the improvements is his opinion only, and the opinion of a registered valuer would be more accurate.

Mr Wright stresses that the subject land and the sale lots are in close proximity to one another, have similar areas, beach proximity, and similar sea views.  The sales only differ with respect of the site improvements.  Mr Wright says that the best sale upon which to rely is that of Lot 428 which is the most lightly improved sale lot.  Using this sale, Mr Wright sees the valuation of the subject land as being $255,000 through a comparison with No 10 Shearwater Street.  Mr Wright is of the opinion that uniformity in valuations cannot be maintained unless beachfront allotments are treated the same way as beachside allotments and this was not so for the 1.10.97 relevant date valuations. 

In support of ground 3, Mr Wright regards the redevelopment of 22 Shearwater Street as being speculative because it involves the estimation of the substantial extra price which will be paid for a sea view.  Mr Wright understands that the purchaser/developer is to retain the lower of two units which are constructed from the original building on the site.  The other level unit with sea views has been sold, and it is Mr Wright’s opinion that it may be some time before a similar undertaking occurs again in Shearwater Street.

With regard to ground 4, Mr Wright says that in Shearwater Street there has been a steadily changing relationship between the valuations of beachfront and beachside allotments, but this has been upset with the increased value of beachfront properties such as the subject land for the 1 October 1997 relevant date valuation.

With reference to ground 5, Mr Wright provided us with a copy of a letter from the Department of Natural Resources dated 5 August 1998 stating the reasons for not having reviewed the valuation of $300,000 for the subject land.  Amongst other matters the letter referred to three sales (one in Shearwater Street (No 22)), one in Tristania Drive and one in Pitta Street.  Mr Wright says the sales in Tristania Drive and Pitta Street are of a different class of beachfront lots when compared with those in Shearwater Street.  The Pitta Street lot is considerably closer to the beach, is elevated on sand dunes and has been developed to have exceptional sea views.  The site in Tristania Drive is elevated and has planning conditions (in another shire) which should permit the construction of a large home with attractive sea views.  It is 3kms from Shearwater Street.

In support of ground No 6, Mr Wright says that a premium price was paid for 22 Shearwater Street because the ultimate construction has sea views not possessed by other adjacent allotments.

Mr Wright provided the Court with a linear regression quality rating analysis in support of his estimate of the value of the subject land.  In the analysis, he compares the factors of area, beach proximity and sea view with a number of other lots.  But I do not find this analysis helpful.  It is far too technical and ignores such other vital factors normally considered by valuers – such as proximity to facilities, aspect, topography, access etc. 

By way of conclusion Mr Wright said that

1.The Department of Natural Resources has inadequately investigated the sales at Peregian Beach and Marcus Beach and failed to take into account the attraction that a sea view adds for expensive beachfront property buyers.

2.Currently 12 beachfront ratepayers in Shearwater Street are paying rates based on non-existent sea views and should have a lower valuation as established in grounds of appeal 1 and 2.

3.A discount factor varying from 0.7 to 1.0 has been applied to properties relevant to his valuation.  Such a wide variation brings into question the uniformity of Maroochy Shire Council valuations if our valuation of $300,000 is confirmed.

4.Two markets exist for Peregian beachfront properties.  Currently there is a slow market for older properties in Shearwater Street.  26 Shearwater Street with an unimproved value of $330,000 and a sale price of $420,000 has been on the market for some time.

Mr Wright called in evidence Ronald Robert Gouch who is a property developer and who was the purchaser of Lot 422 Shearwater Street.  Mr Gouch says that at the time of the purchase of the property the improvements comprised a fully furnished 208m² four-bedroom house with back and front verandahs and a 104m² three-bedroom flat – all of double brick construction.  He purchased the property with the intention of redeveloping in the knowledge that the building was structurally suitable for that purpose.  In contracting to pay the price of $470,000, Mr Gouch valued the property as follows:

Land  $240,000

Furniture  $  30,000

Building  $200,000

Mr Gouch estimates the cost to demolish and reconstruct a building of the type on the purchased land to be at least 850m² and this, he suggests, supports his valuation of $200,000 for it at sale date.  He told us that the property was suitable for what he wanted to do with it – add a storey on top which he could sell.

Mr Olrenshaw also furnished evidence.  He confirmed that the opinion of a registered valuer as to the value of improvements on a list of improved sales he provided to Mr Wright would have to be preferred to his opinion.  But he did offer the view that if the subject land was vacant, then a reasonable asking price for it would be $300,000 to $350,000. 

Called in evidence by the respondent Chief Executive to support the valuation under appeal was Departmental Registered Valuer Howard Frederick Modini who describes the nature of the subject land as being a regularly shaped beachfront parcel with a gentle to medium fall from the road to the rear.

Mr Modini has relied for his valuation of the subject land upon the following sales evidence.

Sale No 1 – Lot 10/M11113, Parish of Weyba – 774m² - L & H Link  to F Weigall on 21.03.97 for $475,000 – analysed unimproved value $473,000 – applied unimproved value $405,000 – situation Tristania Drive, Marcus Beach – zoning “Residential Single Units”.

Mr Modini describes the nature of this land as being a regular shaped beachfront allotment with a gentle to medium fall from the road to the rear and with restricted ocean views.  Mr Modini says this sale property is more remote from local shopping, but is larger than the subject land and has superior ocean views.  He considers this sale property to  be overall superior to the subject land.

Sale No 2 – Lot 428/P93116, Parish of Maroochy – 577m² - N & G Lockyer to S & A Morris on 4.8.97 for $380,000 – analysed unimproved value $350,000 – application $305,000 – situation Shearwater Street, South Peregian – zoning “Residential B”.

Mr Modini describes the improvement on this sale land as comprising an old low-set asbestos cement dwelling on concrete slab with a floor area of approximately 92m².  He describes this sale land as being a regular shaped beachfront allotment with a gentle medium fall from the road to the rear with minimum ocean views available.  Mr Modini considers this sale property to be directly comparable to the subject land.  It has similar beach frontage, size and slope.  It is to be noted that Mr Modini has applied an added value of $27,000 to the dwelling house in his sale analysis, and this compares with Mr Olrenshaw’s value of $70,000.

Sale No 3 – Lot 713/P93127, Parish of Maroochy – 754m² - E Carter to Patella Holdings Pty Ltd on 19.8.97 for $580,000 – analysed unimproved value $477,000 – applied unimproved value $420,000 – situation Pitta Street, South Peregian – zoning “Residential B”.

Mr Modini told us that there is a low-set brick and tile dwelling with a pool on this sale land.  The dwelling was demolished after the date of issue of the 1.10.97 valuations.  Mr Modini describes this site as being a generally level beachfront allotment with beach and ocean views with easy beach access.  Mr Modini says this sale property is more remote from local shopping, however he considers it to be superior to the subject in all other aspects.  It is to be noted that in his sale analysis Mr Modini applied an added value of $100,000 to the dwelling and pool.

Mr Modini has not relied upon the sale of 22 Shearwater Street as part of his valuation notwithstanding the advice from his Department that the sale formed part of the Departmental valuation basis.

It is to be noted that there is one common sale – that of No 10 Shearwater Street.  Following Mr Olrenshaw’s remarks that it would be better to rely on the opinion of a registered valuer for the purpose of assessing the added value of improvements, I prefer to rely on Mr Modini’s analysis of this sale when he places an added value of $27,000 upon the dwelling house in comparison with Mr Olrenshaw’s value of $70,000.

Mr Modini commented in evidence that if the added value of the improvements and furniture on 22 Shearwater Street was at sale date as suggested by Mr Gouch, then the resultant unimproved value of $240,000 is too low in comparison with other sales evidence.  With this I agree and it must follow that the added value of the structural improvements on this land is less than suggested by Mr Gouch.

Mr Modini is not concerned with the claimed lack of uniformity in the valuation of beachfront properties and non-beachfront lands in Shearwater Street for his 1.10.97 relevant date valuations.  He says that in the last few years beach and waterfront properties have seen the largest valuation increases by far. 

The appellants’ case largely relies upon the analysis of the sale of 22 Shearwater Street.  Now it must be said that it is located in close proximity to the subject property and comprises land of similar nature.  But as formerly mentioned, the problem is that it remained a highly improved sale, which for analysis purposes, involved the assessment of the added value of the substantial improvements on it.  No evidence as to the added value of the improvements was placed before the Court – only evidence of replacement value.  Certainly the analysed unimproved value of No 22 Shearwater Street must be seen to be low especially in view of Mr Olrenshaw’s evidence about an appropriate asking price for the subject land if it was offered for sale.

In all the circumstances I cannot hold that the onus resting upon the appellants under the provisions of section 45(4) of the Valuation of Land Act has been discharged. The appeal is dismissed, and the unimproved value of Lot 424 on Plan P93116, Parish of Maroochy, as determined by the respondent Chief Executive in the sum of $300,000 is affirmed.

(CH Carter)

Member of the Land Court