Zitny v Department of Natural Resources and Mines
[2003] QLC 50
•18 July 2003
LAND COURT OF QUEENSLAND
CITATION: Zitny v Department of Natural Resources and Mines [2003] QLC 0050 PARTIES: Marie Zitny
(applicant)v. Chief Executive, Department of Natural Resources and Mines
(respondent)FILE NO:
AV2002/0382
DIVISION: Land Court of Queensland PROCEEDING: Appeal against annual valuation under the Valuation of Land Act 1944 DELIVERED ON: 18 July 2003 DELIVERED AT: Brisbane HEARD AT: Brisbane MEMBER Dr NG Divett ORDER: The appeal is dismissed, and the unimproved value of Lot 2 on RP 12275 as determined by the Chief Executive in the sum of One Hundred and Forty Thousand Dollars ($140,000) is affirmed. CATCHWORDS: Valuation – Use of sales evidence – Whether comparable sales – Comparisons with improved sales – Added value of improvements – Relativity. APPEARANCES: Miss Zitny for the appellant
Mr A Cradick for the respondent
Background:
This matter relates to land at 18 Athlone Street, Woolloongabba, and described as Lot 2 on RP 12275, Parish of South Brisbane. The subject land is located about 2.5 kilometres south of the Brisbane CBD, has an area of 460 m², and has access to Athlone Street which is bitumen sealed with concrete kerbing and channelling. All normal utility services are available, and the land is zoned Character Residential under the Brisbane City Plan 2000, effective at the date of valuation of 1 October 2001. The key issues are the nature of land, impact of rail and road noise, relativity, and comparison of sales.
On 25 February 2002 the Chief Executive issued a valuation of the subject land at $140,000. Following an objection the Chief Executive confirmed that figure on 30 June 2002. The appellant has now appealed claiming the unimproved value should more properly be $90,000. This matter was one of two appeals by the appellant, which were heard consecutively. The other matter at 68 Baynes Street, Highgate Hill (AV2002/0381) is the subject of a separate decision.
Marie Zitny appeared and gave evidence on her own behalf. Mr A Cradick, Senior Legal Officer appeared for the respondent, calling evidence from Arend Boudewyn Van Hees, the departmental registered valuer responsible for determining the valuation. At the request of the parties a joint site inspection was undertaken.
The Grounds of Appeal –
The appellant’s case may be summarised along the following grounds:
· There are no truly comparable sales for comparison purposes;
· Noise from the adjoining railway line, and proximity to busy Annerley Road has not been adequately addressed;
· Parking in the street is difficult, and because of the nature of the subject land, the provision of on-site parking is a relatively costly exercise;
· Relativity with adjoining parcels is not consistent;
· The percentage increase of 92% is not supportable.
However the appellant supplies no specific evidence to support her last conclusion, and there was no evidence of the unimproved value of the subject land at the previous valuation to confirm that percentage increase.
The Nature of the Land –
The subject land is irregular in shape at the rear, and backs on to the railway line, which is in a cutting at that locality. The land is elevated above Athlone Street, falling from the rear to the north about 3 to 4 metres, and then falling 1.5 metres to the footpath level. A contour map (Exhibit 2) confirms those levels. The position of the existing old dwelling is such as to restrict the erection of an on-site car parking garage by excavation. The appellant agrees that several parcels in Athlone Street east of the subject land have built suitable car parking arrangements, at cost she suggests reflect about $20,000.
However, because of the closeness of the existing building to the street alignment, the appellant’s verbal estimate from a builder reflects a possibly significantly higher figure if a similar structure was to be attempted on the subject land. Her understanding is that possible under-pinning of the existing building foundations may be required. For those reasons the appellant argues that parking is a problem at the subject land. Mr Van Hees argues that similar restrictions on parking are also apparent at other similar properties in that locality, and he has made some allowance anyhow in the valuation for that disability.
Miss Zitny further argues that the respondent has made an inappropriate allowance in his valuation for the existing dwelling upon the subject land. It is her opinion that Mr Van Hees has underestimated the size of the dwelling, and its likely replacement building costs, and he has further over-estimated the level of depreciation to apply to those costs in order to reflect the current condition of the building. Miss Zitny currently has a close acquaintance with experienced people in the building industry, but provides no detailed facts to support her conclusions in those matters. Mr Van Hees has valued the existing building on the subject land in his analysis of the sale of the subject land, discussed later.
In explaining her concerns with the situation and aspect of the subject land, it is agreed that there are no views of the City CBD, although the land looks across to the Mater Hospital complex about 0.4 kilometres to the north (Lot 2 on RP 185046 – Exhibit 3). Miss Zitny explains that the parking problem in Athlone Street tends to be worse at night, when the residents are home from work. The current parking arrangements in the street by owners tend to reflect a level of compromise in view of the limited available street parking. However there was no evidence that parking or local road noise was different to that experienced at the sales adopted by Mr Van Hees for comparison purposes. It would be reasonable to conclude that those disabilities were reflected in the market appraisal of the relevant sale prices paid by prudent purchasers. The matter of potential theft in that locality also appeared to reflect similar patterns across the locality.
Relativity –
The appellant mainly seeks relativity with the unimproved values of two adjoining parcels at 20 Athlone Street ($125,000) and a more recent sale at 7 Colin Street ($250,000) at 1 October 2002. She argues that both of those properties are more comparable than the sales adopted by the respondent, as both also adjoin the busy railway line, as does the subject land. She argues that on a “like with like” basis those parcels provide a more direct comparison.
In her comparisons with 20 Athlone Street (Lot 1 on RP 12275) she notes that has a wider frontage to Athlone Street and provides a better street appeal. She notes that a subsequent extension to the existing dwelling on that parcel (Exhibit 6) demonstrates that enhanced streetscape. Mr Van Hees agrees with the added width of 20 Athlone Street, but argues that its smaller area (405 m²) and lesser depth for building purposes, plus its greater exposure to the railway noise, means that it is an inferior parcel to the subject land. He argues the unimproved value of 20 Athlone Street at $125,000, compared to the subject land at $140,000, reflects that inferior nature. He argues that the relative levels of both adjoining parcels are comparable.
In respect of the relativity with 7 Colin Street, it is noted that is a triangular parcel of 602 m² (Lot 17 on RP 12134), which has a larger adjoining boundary, and exposure, to the railway line. That parcel is also much lower in elevation than the subject land, and also is below the railway line, and would accordingly be subject to greater noise from the railway line. It is a similar distance from a busy road (Gloucester Street and Stephens Road), although those roads are not as busy as Annerley Road.
In seeking some support from the sale of 7 Colin Street, Miss Zitny notes that while that sale was subsequently valued by the respondent at 1 October 2001 at $250,000, the sale of that land in February 2003 only reflected a sale price for an improved property at $221,500. She argues that really reflects some inconsistency in the Chief Executive’s approach to applying unimproved values at that relevant date. She notes that the area of 602 m² at 7 Colin Street stands in contradiction to the area of 460 m² at the subject land, if the sale price of 7 Colin Street is to be taken as a guide to market value.
Mr Van Hees rejects those conclusions, noting that the sale at 7 Colin Street has now been cleared for redevelopment as a single residence site. He notes that both its triangular shape, and its small area, restrict any use of that parcel for multi-unit purposes. Mr Van Hees also rejects the use of 7 Colin Street as a late sale in a rising market, and argues that it has relevance more for the next valuation at 1 October 2002, and not for the relevant date in the current matter. In seeking guidance as to whether the 7 Colin Street sale reflected a true value of that land, in spite of its purchase at open auction, he notes that an improved property across Colin Street sold for a small parcel for $366,000. On that basis Mr Van Hees questions the reliability of Miss Zitny’s advice of $250,000 for the unimproved value of the 7 Colin Street property. He feels it would be something less than that level of value.
Comparison of Sales –
To support her estimate of the unimproved value of the subject land, Miss Zitny provides a series of sales records obtained from a local real estate agent. It is her understanding that those sales might more closely reflect a comparable level of improvement as the subject land. She rejects comparisons with sales of improved parcels where the quality of the existing dwelling has been significantly refurbished, as she argues those sales do not reflect a “like with like” comparison. She specifically draws comparisons with sales at 61 Abingdon Street ($174,800 on 17/03/01); 89 and 93 Annerley Road ($165,410 on 21/10/02 and $138,000 on 29/06/01); 10 Heaslop Street ($212,000 on 16/05/01); and four sales at 21, 30, 41 and 51 Ross Street which sold for $204,000 on 3/02/02, $260,000 on 8/04/01, $245,000 on 30/06/01 and $207,500 on 12/02/01). However she provides no specific details about any of those sales. Miss Zitny concedes that her use of those improved sales had only made a cursory allowance for their level of arms length impartiality.
Mr Van Hees rejects such a broad approach as he notes that some of those sales might reflect family transactions, and there is also a significant range of dwelling improvements or different land features. He notes also that 89 Annerley Road and 21 Ross Street sold after the date of valuation at 1 October 2001. He also notes that the sale of a 405 m² site at 61 Abingdon Street for $174,800 reflected a market level at March 2001, well before the date of valuation in a rising market. He argues such comparisons provide little assistance without a more detailed examination of each sale.
To support his valuation Mr Van Hees provides two approaches to the task. Firstly he compares sales of vacant lands, and then he moderates those comparisons with analyses of several improved sales, which are close by to the subject land. Mr Van Hees advises that while there are a relatively small number of vacant or lightly improved lands in that locality, there are many sales of improved lands in the area. He has chosen just four sales of improved lots, including the subject land, to provide a check upon the comparisons from vacant sales in that specific locality. (Exhibit 3).
If I turn first to his sales of vacant lands, I find the following comparisons:
· Sale 1 – (41 Middle Street, Highgate Hill – Lot 2 on SP 122978). This is 422 m² Low Medium Density Residential parcel located about 1.3 kilometres west of the subject land. The sale is regular in shape and falls from south to north about 4 to 5 metres towards Middle Street. The sale is at the end of Middle Street which is a cul-de-sac providing narrow access and limited parking. Overall the sale is seen as superior to the subject land due to the potential for City centre views from a future elevated dwelling upon the sale. The sale sold in November 2000 for $229,000, was analysed at $229,000, and applied at $210,000.
[18]
· Sale 2 – (21 Abingdon Street, Woolloongabba – Lot 5 on RP 12248). This is a 405 m² rectangular Character Residential parcel located about 350 metres east of the subject land. The sale has possible partial City views, and Abingdon Street is a narrow street with limited off-street parking only on one side. However access to the sale is easier than the subject land. Overall the sale is superior to the subject land. The sale sold in February 2001 for $178,000, was analysed at $178,000, and applied at $175,000.
· Sale 3 – (18 Athlone Street – Lot 2 on RP 12275). This was the sale of the subject land in November 2001 for $239,000. The improvements including the retaining wall, dwelling and fencing was analysed to provide an added value of $90,000, giving an analysed value of the land at $149,000, which was applied at $140,000. The dwelling was assessed as occupying an area of 150 m², which would have a replacement cost at $1,000 per square metre of $150,000, and then depreciated by 40% to allow for its age and condition.
In selecting his further comparisons of improved sales all within about 200 metres of the subject land, Mr Van Hees has selected the following (Exhibit 3):
· Sale 1 – (60 Gloucester Street, South Brisbane – Lot 99 on RP 11625). This is a 425 m² parcel which sold in December 2000 for $280,000. The existing improvements were analysed at a replacement cost of $160,000, and were depreciated by 30% to provide an added value of $115,000, giving an analysed value of the land at $165,000. That was applied at $155,000.
[21]
· Sale 2 – (5 Crown Street, South Brisbane – Lot 74 on RP 11625). This is a 425 m² parcel which sold in June 2001 for $340,000. The improvements were analysed at a replacement cost of $170,000, which was then depreciated by 30%, giving an added value of improvements of $120,000, and an analysed value of the land at $220,000. That was applied at $170,000.
· Sale 3 – (10 Ross Street, Woolloongabba – Lot 28 on RP 883518). This is a 695 m² parcel which sold in July 2001 for $460,000. The improvements were analysed at a replacement cost of $270,000, depreciated by 25% to $200,000, giving an analysed value of the land at $240,000. That was applied at $220,000.
Mr Van Hees explains that in assessing the replacement cost of each of the dwellings upon the comparative properties, he has relied upon independent standard costs detailed in Rawlinsons Guide to Building Costs. Mr Van Hees compares his analysed rate of $1,000 per square metre to the more basic unit cost rate for many modern styled dwellings at $500 to $600 per square metre. He argues that allows for the style of construction of “character dwellings”. His estimates of the size of each dwelling were based upon visual inspections using his broad experience. His depreciation rates recognised the differing levels of refurbishment and quality of the buildings. Mr Van Hees advises that while land costs in that locality have increased rapidly in recent years, the building costs reflect a steady pattern consistent with general community increases. He acknowledged that there may be short-term escalation in building costs at that present time due to the shortage of skilled operators, but overall he finds Rawlinsons is a reliable guide.
Mr Van Hees advises that his improved Sale 1 (60 Gloucester Street) is one of the closest comparisons to the subject land, as it has similar traffic and parking disabilities. He notes also that his improved Sale 2 (5 Crown Street) is also closer to Annerley Road than the subject land, and also adjoins a block of units, and would thus suffer greater noise problems. However he concedes that there are no traffic lights on Annerley Road near Crown Street and braking noises would therefore be reduced. Mr Van Hees advises that the variations in applied rates at those sales reflected their differences in location.
Miss Zitny disagrees with the respondent’s estimate of the size of the dwelling upon the subject land, arguing that allowing for the two storeys of dwelling, it would be more like 200 m² of area. Mr Van Hees rejects that analysis, noting that while the top level reflected genuine “Character Housing” qualities, the “granny flat” underneath was in very poor condition, and consisted mainly of fibro construction. On balance he argues that his analysed area of 150 m² made allowance for the inferior quality of the downstairs area. The subsequent site inspection confirmed that an effective building area of between 150 m² and 165 m² might reflect a fair average of the actual area. However in applying a replacement cost of $1,000 per square metre Mr Van Hees has allowed for a consistent standard of Character Housing construction, not evident in the downstairs area. On balance I find that Mr Van Hees’ estimate of 150 m² is reasonable in this matter.
Miss Zitny also disagrees with the depreciation rates applied on the improved sales by Mr Van Hees. She argues that because of the market’s demand for Character Housing, purchasers see great value in original features of construction which are costly to reproduce. She argues that Character Housing therefore does not depreciate similar to more modern construction. However she provides no evidence to support that assumption.
In respect of the comparisons with Mr Van Hees’ sales of vacant lands, Miss Zitny argues that there has been an inadequate allowance made for the impact of City centre views. She notes there are excellent City views from 21 Abingdon Street. There was some difference in understanding of the general nature of City views, but Miss Zitny confirms that her understanding is that it relates to views of City structures other than normal suburban views. Mr Van Hees argues that the market place sees the presence of “City Centre Views” as constituting views of the CBD buildings themselves.
Miss Zitny had relied initially upon the potential City views from a sale at 29 Strath Street, which sold as vacant land in January 2002 for $235,000. The parcel (Lot 7 on SP 128743) has an area of 400 m² and Miss Zitny notes that views of the City centre buildings were visible from Strath Street in front of that sale land. However Mr Van Hees confirms that those views are obstructed by an adjoining dwelling to the north, and the only views from 29 Strath Street are towards the Torbreck Towers building in Highgate Hill. There was some discussion in respect of a sale at 30 Hove Street, Highgate Hill, but that was inconclusive.
In respect of her understanding of good views from 41 Middle Street, Miss Zitny had based her understanding upon her estimate of the extent of City centre views from an inspection from Dornoch Terrace to the rear of that sale, which is about 10 metres higher than the sale. However subsequent site inspections confirm that there were only partial City centre views from that parcel.
Decision:
Before proceeding to the evidence, I note that the appellant has been guided in accepting certain sales evidence by her experience in real estate matters as both a well informed property investor, and also as a Government policy adviser for community infrastructure development purposes. Her general understanding of the residential market in that locality demonstrates her skills in that regard. However in fully understanding what best describes a reasonable value for land, the following description of value assists in understanding what constitutes true market levels. That was described by the High Court of Australia in Spencer v The Commonwealth of Australia (1907) 5 CLR 418, where Isaacs J (later CJ) said at page 441:
“To arrive at the value of the land at that date, we have, as I conceive, to suppose it sold then, not by means of a forced sale, but by voluntary bargaining between the plaintiff and a purchaser, willing to trade, but neither of them so anxious to do so that he would overlook any ordinary business consideration. We must further suppose both to be perfectly acquainted with the land, and cognizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property.”
The Nature of the Land –
It is agreed that the presence of the railway line at the rear is a disability which has been allowed for in the valuation. It is also accepted that parking of vehicles in Athlone Street is difficult at times, and because of difficulties in constructing an on-site car parking area, any attempt to relieve the parking problems were likely to be reasonably costly. Certainly the location of the existing dwelling does create an excavation problem not evident at the adjoining parcels to the east. On that understanding I believe that the subject land should be compared on the basis that on-site parking is limited, and Mr Van Hees has made an allowance for that purpose.
In seeking comparisons with sales of vacant or improved lands, I am reminded that in determining the unimproved value of the subject land, s.3(1) of the Valuation of Land Act 1944 directs:
“3.(1) For the purposes of this Act –
‘unimproved value’ of land means –
(b)in relation to improved land – 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 bona fide seller would require, assuming that, at the time as at which the value is required to be ascertained for the purposes of this Act, the improvements did not exist.”
Relativity:
In seeking relativity with surrounding parcels, I turn first to the adjoining parcel at 20 Athlone Street (Lot 1). I note that Mr Van Hees has allowed for the greater exposure to noise from the adjoining railway line, and also the more restricted building area due to the tapering rear boundary. In view of those disabilities, and the smaller area of 20 Athlone Street (405 m²), I agree that parcel is inferior overall to the subject land. The current unimproved value of $125,000 reflects that relativity.
If I turn then to 7 Colin Street, I note that while that parcel has a larger area (602 m²), the shape of that parcel is triangular. The normal setback building lines required by the Council results in a much smaller usable space on that parcel, and I believe it should be considered on a usable area basis. If I look also at its direct adjoinment with the railway line, I find it has a greater exposure due to its much longer common boundary. I note also that the railway line is elevated above 7 Colin Street, while it is depressed in a cutting behind the subject land.
Miss Zitny is of the view that noise travels upwards, and therefore it would be less of a nuisance at 7 Colin Street (transcript 77). However noise follows normal physical principles as a wave force, which emanates radially from the source. Accordingly, as an elevated railway line across Colin Street, I would agree with Mr Van Hees that the noise intrusions would be more intense at 7 Colin Street than at the subject land. I note also that Mr Van Hees challenges the reliability of the appellant’s advice that 7 Colin Street has a subsequent unimproved value of $250,000. On that basis I get little assistance from that comparison.
Comparison of Sales –
Before proceeding to the actual sales adopted, I note that in determining the unimproved value of land, court precedents have long directed that comparisons with vacant or lightly improved lands is the preferred approach. That was perhaps most clearly expressed in PH Clough v Valuer-General (1981-82) 8 QLCR 70 where the Land Appeal Court said 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.”
That was later followed in WM and TJ Fischer v 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. Whilst maintenance of correct relativity is also of considerable importance for rating or revenue type valuations, we cannot prefer in the circumstances of this case, the use of the principle of relativity to the exclusion of the sales evidence.”
That principle was also followed in R and MM Barnwell v Valuer-General (1990-91) 13 QLCR 13, at 17; and later in Hans and Else Grahn v Valuer-General (1992-93) 14 QLCR 327, at 328. Indeed until a recent decision of the High Court (Maurici) the use of sales of vacant lands has always been preferred by the Courts as the best approach to determining unimproved value of land.
However where such vacant land sales are so scarce in number and comparability as to reflect a special factor of “scarcity” in the market place, then additional confirming evidence should be adopted to assist in identifying the quantum, if any, that might apply to the land as a consequence of that abnormal scarcity factor. It is in seeking to satisfy that guidance that Mr Van Hees has now provided his further improved sales as a comparison to the sales of vacant lands. Mr Van Hees acknowledges that there are very few sales of vacant lands in the area, but he has not admitted that those few sales now reflect a level of scarcity not evident in a normal market situation.
In considering the matter of scarcity I note that as with normal economic theory dealing with goods and services, the price paid for residential lands fluctuates according to its level of supply and demand in the community. The market price for land is achieved in accordance with the Spencer test, when an equilibrium is achieved between those two economic forces in a normal elastic market situation. When the supply side of the equation is restricted to virtually only one or a very restricted number of parcels available, then the market experiences the situation of inelasticity, and the price for those few remaining parcels rises significantly. That situation is a level of “scarcity” which is seen to transcend the normal market situation.
Now the impact of scarcity of supply in reality is always existent in a property market, as land itself is not a totally renewable resource. If there was no relative scarcity, then land would have a very low value. However, when scarcity increases to a level where only a few, if any, options are available, then that level of scarcity becomes a major determinant of the restricted market place.
In the matter of Maurici v Chief Commissioner of State Revenue [2003] 195 ALR 236, handed down on 13 February 2003, just prior to the date of exchange of technical reports in the current matter on 3 April 2003, the High Court directed that, where it was agreed that a “scarcity” factor did exist, then the use of such sales alone, may lead to an incorrect conclusion in respect of the normal market value of the land. That has led to a re-evaluation of the approach to similar appeals.
If I look more closely at Mr Van Hees’ advice that, while the existing sales of vacant lands in the South Brisbane area are very limited, he does not accept that the selected two sales at 41 Middle Street and 21 Abingdon Street are not comparable to the subject land. He notes that in all aspects, except for the presence of views of the City centre buildings, the size, location and access problems are comparable to the subject land. On the evidence that is reasonable. However it then raises the issue of what level of added value does the potential of City centre views bring to those two parcels, which are not evident at the subject land. Mr Van Hees uses his wide experience as a valuer in this area to make this comparison.
However I am also aware that in arriving at his conclusions, such judgment should be based upon evidence. That was noted in Nutting v Chief Executive, Department of Natural Resources (1999), 20 QLCR 29, where the Member noted at p.36:
“While the judgment of an experienced valuer is a legitimate guide to his professional opinion of an area, it is always important to ensure that such judgment is supported by evidence in the market place.
That was outlined in the text ‘Land Valuation and Compensation in Australia’, Rost and Collins, 3rd edition 1984, which said at p.22:
‘A registered or licensed valuer is regarded as a person who possesses special training. He is entitled to express opinions as to value or other matters appertaining to his vocation, but these cannot be more valid than the information and reasoning upon which they are founded. In general, opinion evidence is not admissible unless it is given by a witness called as an expert. Court judgments have emphasised that the weight of an expert’s opinion concerning the value of land depends upon the foundation upon which it rests.’”
That was followed in the decision of the Land Appeal Court in Santos Limited v Valuer-General (1988-89) 12 QLCR 231, which followed the principle that a value based upon sales “was to be preferred to a valuation based on opinion”. (at 235, 236).
That this leads me to the comparative studies of the four improved sales, including the sale of the subject land. If I consider first the sale of the subject land, I am reminded that the High Court considered the sale of the subject land in the matter of Jowett v Federal Commissioner of Taxation (1926) 38 CLR 325, where Rich J said at p.329:
“A sale of the subject land, or of comparable land, affords the best means of arriving at the fee simple value of any land, … .”
However that also needs to be conditioned by the findings of The Chief Executive, Department of Lands v J and L Lorenzen (AV93-22) 1 June 1994, unreported, where the Land Appeal Court said at p.4:
“Whilst we agree that a sale of the subject land should always be considered in assessing its value we hasten to stress that such a sale is only prima facie evidence of its value. The weight which must be given to the sale is dependent upon a number of factors, the most important of which is whether the sale is in reasonable conformity with the market as demonstrated by other sales of comparable land.”
In the current matter therefore Mr Van Hees sought evidence of three other supporting improved sales to support his analysis of the subject land sale.
In considering those four improved sales, I am aware of the concept of “added value of improvements” has been considered by the courts. Some direction in that respect may be found in the decision of O’Brien Nominee Pty Ltd v Valuer-General (1979) 6 QLCR 280, where the Land Appeal Court gave the following guidance at p.285:
“It seems to us that the concept of ‘added value’ of improvements involves at least two methods of valuation, the appropriateness of which depends to a substantial degree on the economic conditions prevailing at the relevant time.
In times of normal, and above normal, prosperity the added value which improvements give to land generally exceeds their value deduced by the traditional method of replacement cost less depreciation. The ‘added value’ of the improvements in these circumstances is usually ascertained by the method of adding to their value ascertained by the traditional method, interest for half the period of time it would take to put the improvements on the land and for them to become fully productive – vide Kiddle’s case 27 C.L.R. 316.
In the subject circumstances, when economic conditions are depressed, the traditional method ceases to be appropriate because its application results in an entire or substantial absorption of the total sale consideration and, as already discussed, leads to an absurd situation. ‘Added value’ in these circumstances continues to be a matter of ascertaining what value the improvements add to the land in question at the relevant date irrespective of their cost, but owing to the special circumstances prevailing, there is a change of emphasis and it is a matter of ascertaining the amount which the hypothetical prudent purchaser, fully appreciative of the depressed economic conditions, would give for the actual improvements, irrespective of the cost of making them. In short it is the value the market is prepared to pay for the specific improvements on the property.”
Now in O’Brien the Court was considering the matter of a large rural property where the market of sheep and wool had been severely depressed. However the principle also has application with urban land, where market fluctuations can change considerably over time. In the current matter it is agreed that the market for residential lands in South Brisbane has risen considerably, and could be described as above normal expectations. The test is what level of value is the market prepared to pay for the improvements.
Now Mr Van Hees has estimated that the market would see the added value of the improvements as something less than their new cost of construction. Miss Zitny disagrees, arguing that often such selective “character housing” would be at least cost neutral if they were to be demolished or removed. But the evidence of 7 Colin Street would appear to dispute that opinion, as that parcel has subsequently been cleared for redevelopment as a single residence site. On balance I accept Mr Van Hees’ advice, and also his considered opinion about the relevant depreciation allowed in each improved sale in accordance with their existing conditions of repair.
If I then accept Mr Van Hees’ analyses of the sales provided, I find the following comparisons:
Sale Area Applied Unimproved Value Comparison Vacant 1 (41 Middle Street) 422 m² $210,000 Superior Vacant 2 (21 Abingdon Street) 405 m² $175,000 Superior Improved 1 (60 Gloucester Street) 425 m² $155,000 - Improved 2 (5 Crown Street) 425 m² $170,000 - Improved 3 (10 Ross Street) 695 m² $220,000 - Subject land 460 m² $140,000 - Relativity (20 Athlone Street) 405 m² $125,000 Inferior There is nothing in those comparisons to demonstrate that Mr Van Hees has either followed a wrong principle, or made an error of fact. If I also consider the relativity with the adjoining 20 Athlone Street, I find the current unimproved value of the subject land is appropriate.
Summary:
In summarising this matter I am reminded that s.33 of the Act directs:
“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.”
I am also aware that in respect of the notice of appeal under this Act, s.45(4) directs:
“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.
That responsibility has not been expunged.
Conclusion:
Having considered the whole of the evidence I am not persuaded that the appellant has proved her case. The appeal is dismissed, and the unimproved value of Lot 2 on RP 12275 as determined by the Chief Executive in the sum of One Hundred and Forty Thousand Dollars ($140,000) is affirmed.
NG DIVETT
MEMBER OF THE LAND COURT
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