Ashwick v Department of Natural Resources and Mines [2003] QLC 17

LAND COURT OF QUEENSLAND CITATION: Ashwick v Department of Natural Resources and Mines [2003] QLC 17 PARTIES: Ashwick (Qld) No 74 Pty Ltd (applicant) v Chief Executive, Department of Natural Resources and Mines (respondent) FILE NO/S: AV2002/0292 DIVISION: Land Court of Queensland PROCEEDING: Appeal against annual valuation under the Valuation of Land Act 1944 DELIVERED ON: 13 March 2003 DELIVERED AT: Brisbane HEARD AT: Coolangatta MEMBER: Dr NG Divett ORDER: The appeal is dismissed, and the unimproved value of Lot 1 on SP 108052 as determined by the Chief Executive in the sum of Three Million Dollars ($3,000,000) is affirmed. CATCHWORDS: Valuation – sales – sales analysis – nature of the market – whether highest and best use can be achieved – difference between present use and highest and best use [62-65]. Valuation – factors in valuation – zoning proposed changes to zoning – relied upon proposed changes – uncertainty in the market place [54-56]. Valuation – annual valuation – method of valuation – highest and best use – lack of suitable large sites [21]. -- 1 of 21 -- 2 Valuation – factors in valuation – zoning – proposed changes to zoning – knowledge of changes – risk to development – impact on market value [54-56]. COUNSEL: Mr B Cronin for the applicant Mr W Isdale of Crown Law for the respondent Corrs Chambers Westgarth for the applicant Background: [1] This matter relates to land located at 1118 Gold Coast Highway, Palm Beach, and described as Lot 1 on SP 108052, Parish of Tallebudgera. The subject land is situated about 13 kilometres south of the Gold Coast Mail Centre at Bundall, and about 150 metres west of the Pacific Ocean. The site is currently used as the Palm Beach Hotel complex. Overall access is good to the three street frontages of Gold Coast Highway, Palm Beach Avenue and Fifth Avenue. The Gold Coast Highway is a divided four-lane bitumen sealed road with concrete kerbing and channelling, with access restricted to north-bound traffic due to a centre median strip. Both Palm Beach Avenue and Fifth Avenue are bitumen sealed with concrete kerbing and channelling, both with kerb-side parking. All normal urban utility services are available. [2] The subject land has an area of 5,050 m², and is zoned Comprehensive Development under the Town Plan of the Gold Coast City Council (the Council) of 24 February 1994, effective at the date of valuation of 1 October 2001. The key issues are the impact of planning controls, comparison of sales, nature of the property market, relativity, and the highest and best use of the land. [3] On 25 February 2002 the Chief Executive issued a valuation of the subject land at $3,000,000. Following an objection the Chief Executive confirmed that figure on 25 June 2002. The appellant has now appealed claiming the unimproved value should more properly be $2,500,000. At the hearing on 30 October 2002 leave was granted to amend that figure to $2,400,000. [4] Mr B Cronin of Counsel (instructed by Corrs Chambers Westgarth) appeared for the appellant, calling evidence from Grant Jackson, an experienced registered valuer. Mr W Isdale Counsel of Crown Law appeared for the respondent, calling evidence from Gregory Patrick Crowley, the experienced senior valuer for the Gold Coast regional office who was responsible for determining the valuation. -- 2 of 21 -- 3 The Evidence: The Use of the Land - [5] It is agreed that the subject land has been used for many years as a hotel and gaming venue. It is also agreed that the existing buildings are only developed to three storeys; and the subject land has approximate frontages to Gold Coast Highway (52.3 metres), Palm Beach Avenue (40.6 metres), and Fifth Avenue (74.5 metres). The site is 80.4 metres wide from avenue to avenue, and is a level site. [6] The only difference between the parties is whether the existing use of the site represents its highest and best use as reflected in the current market conditions. Mr Crowley argues that the highest and best use should be valued on the basis of its maximum development potential under the Town Plan. Mr Jackson accepts that a high level of development could be achieved under the Town Plan, but argues that such a level could not be realized if offered for sale at the relevant date as explained later. That is really the key issue in this matter. The Impact of Planning – [7] Mr Crowley advises that under the “Development Control Plan No. 3 – Palm Beach Central Area” of the existing Town Plan, the subject land is included within “Precinct 1 – Central”. He notes further that under the draft Gold Coast planning scheme now being implemented under the Integrated Planning Act 1997, the subject land is to be included in the “Palm Beach Local Area Plan”. He advises further that under that proposal of the draft Gold Coast Planning Scheme, the “Palm Beach Local Area Plan” indicates similar potentialities, but with an increased density of development potential. [8] Under Precinct 1 of the Development Control Plan No. 3 – Palm Beach Central Area, Part 20 of that Plan directs that the maximum building height is to be seven storeys, and the basic plot ratio is 2 to1, with a maximum plot ratio of 3.5 to 1. (Exhibit 3 – Annexure v, Part 20.3.4 and 20.3.5). Mr Crowley agrees that the maximum plot ratio of 3.5 is always at the discretion of the Council, but argues that in his opinion, the key factor considered in such variation by the Council, is the total area proposed for the development. Mr Crowley suggests that the bigger the size of the parcel proposed, the higher the plot ratio likely to be approved by the Council, and therefore the higher will be the proposed development. He argues that developers always seek to maximize their profit margins, and thus seek to build to the maximum permissible. -- 3 of 21 -- 4 [9] Mr Jackson does not disagree with that understanding, but argues that whether a developer will choose to seek to achieve a higher plot ratio, will depend upon the nature of demand in the market place. He argues that the demand for certain levels of development is what ultimately drives development, and not merely the maximum potential achievable under the Town Plan. [10] Another factor in any consideration of the subject land, as noted by Mr Crowley, is the requirement for a commercial component on the ground floor of lands within Precinct 1 (Intent: part 20.3.1). That is not contested by Mr Jackson, although he concedes that his enquiries of the scope of the planning constraints for other than the subject land, were restricted to confirming the zoning of the sales comparisons. [11] Of more concern to Mr Jackson however was the apparent reliance by Mr Crowley upon the proposed increase in the density of development potential within Precinct 1. In the draft Local Area Plan, it is proposed to reduce from the former minimum of 33 m² of site area for each one bedroom unit, to a minimum of 25 m² of site area for each one bedroom unit. Mr Jackson argues that at the relevant date of 1 October 2001, the draft Local Area Plan had in fact not even gone on public display, and therefore a prudent purchaser could have placed no reliance upon the unofficial intentions of the Council at that date. He agrees that there was likely to have been some industry speculation about proposed changes at 1 October 2001. [12] Mr Jackson argues that a prudent developer could not have relied upon those facts. In any case he argues that any prudent sale at 1 October 2001 would have built a discount factor into any price negotiated. Mr Crowley argues that to cover any uncertainty a conditional sale is generally the approach adopted in most major developments in the area, and he sees no problems in that regard. However he agrees that the draft Local Area Plan continues to remain in draft form till the present time. [13] Mr Crowley’s recollection of events surrounding the revision of the draft Local Area Plan, was that it commenced about 1997 when the Integrated Planning Act 1997 came into force, and was released in draft form about September 2001, for a three months period of public consultation, closing about March 2002. He recalls that the initial public release of the draft scheme was withdrawn for some reasons, to his understanding associated with native title and other matters. However he was unsure of the exact reiterations of the draft proposals. [14] Mr Jackson’s enquiries of the Council reveal that the draft scheme was first released on formal display on 22 October 2001, and was subsequently withdrawn from public display on 31 October 2001. It was then re-exhibited on public display on 18 February 2002, and -- 4 of 21 -- 5 later taken off exhibition on 22 May 2002. Mr Crowley cannot refute those details. Mr Jackson does not detail the exact reasons why the draft scheme was withdrawn, or whether any of the about 90 variations affected any of the sale properties or the subject land. However he argues that any uncertainty would have weighed upon the mind of a prudent purchaser at that time. On that basis he argues such a prudent purchaser would tend to rely upon the existing planning controls then in force at the time of the valuation of 1 October 2001. Changes in the Market – [15] Another matter of concern to Mr Jackson is the approach taken by Mr Crowley in seeking to apply any perceived changes in the market for small parcels, compared to the market for larger parcels. On the basis of his Sales 4 and 5 Mr Jackson agrees that sales for smaller parcels varied from about $457 per square metre to $543 per square metre in 1999 and 2000, to about $560 per square metre to $568 per square metre in 2001. He agrees that if he then compared the lower rate in 1999/2000 ($457 per square metre) to the higher rate in 2001 ($568 per square metre), that would reflect a change in the market of 24%. However he cautions reliance upon his Sale 5, which he argues was an adjoining owner sale with some potential for premium included in that price. He agrees that between August 2000 and May 2001 an optimistic view of the market for smaller parcels might suggest an increase of the order of 20%. [16] However he conditions that opinion with the evidence available for the larger sites at his Sale 2 (1198 Gold Coast Highway) analysed at $365 per square metre, and his Sale 1 (1040 Gold Coast Highway) at $387 per square metre. He notes that during the ten months between those two sales the market only increased about 6%. While he does not rely upon such a comparison, Mr Jackson also notes that the Chief Executive has demonstrated an increase in the value of Sale 2 (1198 Gold Coast Highway) of 9.9% over the period of 15 months for that property. He concludes those figures from a comparison of his analysed rate ($365 per square metre), compared to the Chief Executive’s apparent applied rate ($401 per square metre) during that period. Mr Jackson agrees that there had been a sale and resale of the 1040 Gold Coast Highway site, but he is skeptical of the circumstances of those sales. [17] In explaining his approach to the valuation, Mr Crowley advises that, while his sales evidence would suggest an overall increase of 46% from the former unimproved values, in order to retain relativity in the area, he had only increased the commercial lands in that area by 35%. However he confirms that overall relativities in the area had changed, as -- 5 of 21 -- 6 non-commercial lands had been increased by 40% to 50%. Mr Crowley explains that the market had been flat in the post-GST period, until about the fourth quarter of 2002, when it then started to rise. Apparently the market had remained static from 1997, rising slightly towards the end of 1999, then plateauing again during 2000, until it started to rise later that year. [18] In respect of Mr Jackson’s observations about possible increases in the value of the 1198 Gold Coast Highway land at 9.9%, Mr Crowley refutes Mr Jackson’s interpretation of that property increase. Mr Crowley notes that property was in fact determined to have an unimproved value of $1,200,000 at 1 October 2000, and increased by 40% to $1,700,000 at 1 October 2001. Mr Crowley argues that it is not appropriate to compare the sale price with the subsequent applied value. He advises further that 40% increase is consistent with other non-commercial values in that area. The Nature of the Market – [19] A key difference between the parties is the differing interpretations of the market’s appreciation of the potential for development in the area of the subject land west of the Gold Coast Highway in Palm Beach. Mr Jackson argues that the current lack of any existing developments in that area above the existing three storey level, demonstrates that the market place sees developments to a higher level as premature. He agrees that the subject land could theoretically have been developed up to seven storeys, but argues that could not be justified with current demands for sites in that area. [20] Mr Crowley argues that the existing plot ratio and height restrictions under the Town Plan are matters that would be considered by a potential purchaser. On that basis he argues that a prudent developer would seek to maximize in his development, and seek to build to the maximum requirements enshrined in the planning ordinances. Mr Jackson agrees that the Council does provide those guidelines, and is responsible for issuing permits for construction of buildings. However he argues that whether the development will proceed to the maximum limits permissible is an economic decision for the developer. He argues that it is the demand for certain end products and densities of development, which then influence whether a developer proceeds or not. [21] In the circumstances of the subject land Mr Crowley agrees that there are no existing buildings higher than three storeys in Palm Beach west of the Gold Coast Highway. He notes that situation existed at the relevant date, and continues to the present time. He also agrees that the existing flat nature of the property market in that area was not conducive -- 6 of 21 -- 7 of higher development. Mr Crowley concedes that there are a number of successful developments of seven or multi-storey buildings in Palm Beach to the east of the Gold Coast Highway. However Mr Crowley argues that there are very few parcels, with the exception of 1198 Gold Coast Highway, which are large enough to sustain a large and high development. He feels such lack of available supply of sites may well be the reason why no existing buildings have been built beyond three storeys. [22] To support that conclusion Mr Crowley draws support from other areas of the Gold Coast, stretching from Labrador to Coolangatta, where taller buildings have been developed to the west of the Gold Coast Highway. Mr Cronin refutes that generalization, noting that Palm Beach is a different sub-market area to Broadbeach and Surfers Paradise. He notes that even at Labrador on the north end of the coast it has been about 10 years since a tall building was developed west of the Highway. Mr Crowley agrees that such taller buildings to the west tend to reflect the more boom period of the 1980s, and the demand for high rise west of the Highway, except in selective areas, has been more circumspect. However he argues that confidence now appears to be growing for developments in those areas. [23] But in spite of any growing confidence in the property market, and although the new Integrated Planning Act 1997 now allows some greater discretion to Councils, there has continued to be no evidence of a desire to build higher to the west of the Highway in Palm Beach. The major targets for development continue to be sites where direct access is available to the ocean, and where beach and ocean views can be provided. Mr Jackson agrees that the subject land has the development potential to be redeveloped to seven storeys, but argues that could not be achieved until the market sees that the parcel is able to achieve its full potential. [24] While Mr Crowley agrees that Palm Beach is a particular area, and land values vary either side of the Gold Coast Highway, he argues that the western side of the Highway should be considered in the wider context of the property market, and not in isolation. He agrees that there is a certain number of smaller developers who have demonstrated a consistent style of development (three storey walk-ups) in the area, and that its main uses are service tourist types, a strong medical influence, and retail and office accommodation. [25] However he notes that in the relevant period there has been a significant level of investment on new properties in the area, as well as increases in sale prices. Because of that increase in number and value of sales, Mr Crowley sees the socio-economic factors are changing, which is likely to be reflected in a different demand for housing in the area west of the Highway. However he agrees that until recently the style of housing in the -- 7 of 21 -- 8 area had been of a modest type of construction. Mr Crowley therefore argues that it is not possible to clearly differentiate one level of the residential market from another, as can occur say in industrial lands. He argues the overall market and sub-market tend to merge into each other, in the residential market area. [26] While Mr Crowley accepts that the market is slower to the west of the Highway in Palm Beach, he argues that the trend for higher development is evident on the rest of the Gold Coast area. He argues then why should the Palm Beach area be treated in isolation? He further notes that in other areas, where comprehensive development of resort residential uses are proceeding, they also have had the benefit of commercial activities on the ground floor, similar to the subject land. However the question remains that there is no recent evidence of sales and developments to higher levels to the west of the Highway, near the subject land, that would support that the trend is now evident in that area also. Until that is available it may be premature to conclude otherwise. Comparison of Sales – [27] To support his estimate of the unimproved value Mr Jackson provides the following sales:  Sale 1 (1040 Gold Coast Highway, Palm Beach). This is a 1,821 m² parcel located south of the subject land, and at the corner of Gold Coast Highway and Hawaii Avenue, which has limited views of the beach from the upper levels. The sale is zoned Residential Multi-Unit, and is proposed under the new draft Gold Coast City Council planning scheme as Residential Choice Domain. Both zonings are similar and provide for medium to high density residential areas. The sale sold in May 2001 for $705,000, was analysed at $387 per square metre. It had an unimproved value at 1 October 2001 of $670,000 ($386 per square metre). [28]  Sale 2 (1198 Gold Coast Highway, Palm Beach). This is a 4,244 m² parcel located to the north of the Palm Beach retail/commercial precinct, and at the corner of Gold Coast Highway, Ninth Avenue and Tenth Avenue. It is currently zoned as Special Facilities, and is proposed in the new draft plan to be rezoned as Residential Choice Domain. There are ocean views from the upper levels. The sale sold in July 2000 for $1,550,000, was analysed at $365 per square metre, and had an unimproved value at 1 October 2001 of $1,700,000 ($401 per square metre). Mr Crowley argues that the higher application of that sale is in line with any number of other sales in the area. He also notes that Sale 2 was an earlier sale. [29]  Sale 3 (16, 18 and 20 Seventh Avenue, Palm Beach). This sale comprises three lots each zoned Comprehensive Development, and each of area 405 m². (Total area 1,215 m²). Two of the lots have existing residences which are currently rented. The -- 8 of 21 -- 9 parcel at 20 Seventh Avenue sold in May 2001 for $227,500, and 16 and 18 Seventh Avenue sold in March 2001 for $230,000 each. [30]  Sale 4 (10 Seventh Avenue, Palm Beach – Lot 70 on RP 32000). This is a 405 m² parcel located about 240 metres north of the subject land. The sale was occupied with a two storey brick house and is zoned Comprehensive Development. The analysis of the sale makes no allowance for the existing structure. The sale sold in August 2000 for $185,000, was analysed at $185,000 ($457 per square metre) and has been applied at 1 October 2001 at $115,000 ($284 per square metre). [31]  Sale 5 (9 Sixth Avenue, Palm Beach – Lot 81 on RP 32000). This is a 405 m² parcel located about 180 metres north of the subject land, and is zoned as Comprehensive Development. An existing fibro dwelling was demolished in April 2001 and the sale was an adjoining owner sale for car parking purposes, suggesting some premium was involved. The sale sold in July 1999 for $220,000, was analysed at $220,000 ($543 per square metre), and had an unimproved value at 1 October 2001 of $110,000 ($272 per square metre). Mr Crowley argues that it is also an older sale, and its current age and section 17 rating makes it of little use in comparing the subject land. [32] In assessing his sales which are west of the Gold Coast Highway, Mr Jackson acknowledges that there have been limited sales evidence in the immediate area of Palm Beach. He places greatest emphasis upon his Sales 1 and 2 as the nearest in size to the subject land, reflecting the market for larger sites. He sees both of those as vacant sales. He argues that both of those larger sales reflect residential use densities consistent with the subject land, where residential development is proposed above the ground (commercial) level. [33] Mr Jackson argues that his Sale 1 (1040 Gold Coast Highway) has subsequently been developed with a three level development comprising 18 residential units. He concedes that level of development is less than the maximum permissible under the Town Plan. It has two-street frontage compared to the three streets at the subject land; fronts the Gold Coast Highway, and is close to the subject land. However he agrees that there is no requirement for commercial activities on the ground floor level. [34] He also confirms that 1040 Gold Coast Highway was originally sold as a non-conforming commercial use (Chinese Takeaway of no added value) in May 2000 for $590,000. After obtaining planning approval for the current level of residential development, it was resold in June 2000 for $680,000. The property was then resold again in May 2001 for $705,000. The maximum height allowable is three storeys, with a maximum unit density -- 9 of 21 -- 10 of 1 to 33 m². The current level of development reflects a rate of 1 to 100 m². Mr Jackson explains that the 1 to 33 unit density reflects one bedroom unit development, while the 1 to 100 unit density reflects two and three bedroom units, clearly preferable in that area. Mr Crowley argues that the permitted density for two and three bedroom units (D2) is 1 to 50 bedroom density, which is closer to the maximum bedroom density allowable under the plan. [35] Likewise Mr Jackson explains that his Sale 2 (1198 Gold Coast Highway) was a former church site, with no added value in the existing improvements. That sale has three street frontage, and fronts the Gold Coast Highway, and has now been developed with a three level 42 unit residential development. Mr Jackson provides density and height details (Exhibit 4) which show that his Sales 2 to 4, and 5 are each able to be developed to unit density of 1 to 33 m², with a maximum height of three storeys without consent of Council, and up to seven storeys with special consent of Council. The current level of development is only 1 to 100 m², which he suggests reflects the market’s demand in that area. Mr Crowley also cautions about comparing unit densities and bedroom densities. He notes also that smaller sales in that area are reflecting comparable rates. [36] In comparing his Sales 1 and 2 to the subject land, Mr Jackson has made an allowance in the rate for the subject land at $475 per square metre, for its potential for commercial development on the ground floor. In his opinion that is a relatively generous allowance as he argues that commercial area is not a quality commercial area. He also makes some allowance in his overall increase of 20% on his Sale 1 to $475 per square metre for any long term future potential extant from the development to seven storeys on the subject land. He then applies a similar adjustment of 30% to the rate for Sale 2 to conclude $475 per square metre for the subject land. Mr Crowley sees Sale 1 (1040 Gold Coast Highway) as an inferior sale outside the commercial area. [37] While Mr Jackson agrees that generally there is normally some discount allowed in the rate per square for the size of larger parcels, compared to smaller parcels, he concedes that in adjusting his rate for his Sales 1 and 2 he had made no such specific adjustment for the subject land compared to those two sales. However he argues that a size allowance has been made for each of his comparable sales, and size alone is not the only criteria for comparison purposes. He agrees that larger sites on the Gold Coast are often seen as having a higher potential to develop the maximum plot ratio due to their larger size, and that is a relevant factor for consideration also. But he argues that is always subject to market demand. Mr Crowley argues that on the Gold Coast “bigger is better”. -- 10 of 21 -- 11 [38] In respect of his Sale 3 (16 to 20 Seventh Avenue) Mr Jackson was unsure of the correct application of that sale under s.17 of the Act. Mr Crowley advises that both of those separate sale parcels had been given concessional valuations as single residence sites, while the existing old dwellings are inhabited. He advises that the parcel at 20 Seventh Avenue has a concessional valuation of $115,000, while the combined parcels at 16 to 18 Seventh Avenue has a single concessional valuation of $170,000. [39] In respect of his Sales 3, 4 and 5 Mr Jackson provides those merely to demonstrate any changes in the market. He argues that it is very difficult, and inappropriate to seek comparisons between sales of smaller sites such as Sales 4 and 5, and the larger subject land. He does not use those sales as any direct comparison. He also concedes that his Sale 5 (9 Sixth Avenue) is an old sale and is located in Precinct 2 of the Town Plan, not in Precinct 1 as is the subject land. He argues that Precinct 2 has a density of 1 to 50, a basic plot ratio of 1 to 1, and a maximum plot ratio of 2 to 1; while Precinct 1 has a density of 1 to 33, a basic plot ratio of 2 to 1, and a maximum plot ratio of 3.5 to 1. However again he argues that the maximum development would be subject to market demand. Mr Jackson also agrees that his Sale 4 (10 Seventh Avenue) was an old sale with a dwelling on it which had been valued at $115,000 as a s.17 concessional valuation. [40] In support of his valuation Mr Crowley provides the following sales:  Sale 1 - (20 Palm Beach Avenue, Palm Beach – Lot 9 on RP 901396). This is a 1,214 m² parcel located about 100 metres west of the subject land, and adjoining the subject hotel and retail office development. The sale is heavily improved and comprises a low set brick building currently fully leased for medical purposes. The sale is seen as inferior due to its size, restricting development, accessibility and exposure. The sale sold in January 2001 for $1,350,000, was analysed at $840,000 ($692 per square metre) and applied at $670,000 ($552 per square metre). The sale is zoned as Comprehensive Development. [41]  Sale 2 - (16 to 20 Seventh Avenue, Palm Beach – Lots 73 to75 on RP 32000). This is a 1,215 m² parcel located about 300 metres north-west of the subject land, adjoining office and retail developments, and adjoining an open public car park. The sale is improved with two old dwellings, which were not seen as its highest and best use. Overall the sale is seen as inferior to the subject land due to inferior location, exposure and development potential. The sale sold as two parcels in March and May 2001 for a total sale price of $687,500 ($566 per square metre), was analysed at $693,550 ($571 per square metre) after allowing for removal of the dwellings, and has a notional applied value of $640,000 ($528 per square metre). This is a common sale with the appellant’s Sale 3. [42]  Sale 3 – (corner Coyne and Winston Street, Kirra – Lot 15 on C 28537); Lots 5 and 6 on RP 1859; Lots 10, 11, 14, 38 and 3112 on C 28537; and BUP 1447). This is a -- 11 of 21 -- 12 5,277 m² resort Residential 1 parcel located about 8 kilometres south of the subject land. The land fronts two streets, and has frontage to an ocean esplanade at Musgrave Street by BUP 1447. Several fibro cottages and a brick unit building were removed for redevelopment at a cost of $55,000. The sale is remote from the subject land, closer to the ocean, and has greater height potential, greater commercial potential and a higher density of development. Overall the sale is seen as superior due to its aspect to the ocean. The sale sold in July 2001 for $4,150,000 ($786 per square metre), was analysed at $4,205,000 ($797 per square metre), and applied at a notional unimproved value of $3,800,000 ($720 per square metre). Its previous unimproved value was $303 per square metre for an increase of 131%. [43] Mr Jackson challenges the comparability of Sale 3 (Coyne Street, Kirra) as he notes that virtually has beach access via Musgrave Street, it has direct outlook to the ocean, has the potential to be developed to fifteen storeys, and is a tourist resort. Mr Jackson notes that the subsequent tourist timesharing development has sought to maximize those ocean views. The owner is an international developer, who has constructed 105 one, two and three bedroom units at a density of 1to 50 on that site, with a height of fifteen storeys. [44] Mr Crowley agrees with those features, but he notes that his Sale 3 has no commercial uses on the ground floor, as exists with the subject land. Mr Crowley notes that similar parcels zoned as Comprehensive Development at Broadbeach, for example, have reflected price rates of about $3,000 per square metre; while adjoining resort Residential 1 developments only reflect a rate of about $1,500 per square metre. On that basis Mr Crowley sees an advantage in the commercial floor development approach applicable for the subject land. However he agrees that Kirra and Palm Beach have different socio- economic profiles. [45] In respect of Mr Crowley’s Sale 1 (20 Palm Beach Avenue) Mr Jackson rejects that as a useful comparison for determining unimproved value purposes. He notes for example that Sale 1 at the date of sale had a total rental return of $161,434 (reflecting 11.95% on the purchase price). He argues that reflects a sale for investment purposes, which is therefore very difficult to fully analyze. He notes further that the existing leases vary from one year to six years, and one lease has a further four years of option available. All of those features make it very difficult to determine the added value of the improvements. He argues he would never use such an approach if there are vacant sales available. [46] Mr Jackson further argues that the existing four leases on Sale 1 (20 Palm Beach Avenue) are to specialist medical tenants, reflecting very high returns on a total lettable area of 384 m² (or $420 per square metre), well above the normal level of rent for an office type tenancy. He argues that because of the nature of the tenancies the added value of the building should reflect some specialist nature. Mr Jackson agrees that the property was sold previously in 1997 for $1,400,000, and the resale in 2001 at $1,350,000 could -- 12 of 21 -- 13 suggest a decline in the market level. However in his opinion he feels the lower sale price more correctly reflects the added value of the leases in existence at 2001. Mr Jackson also advises that in addition to the problems of determining the added value of improvements on Sale 1, there is also the task of making an appropriate allowance for the smaller size of that sale (1,214 m²) compared to the subject land (5,050 m²). [47] In respect of the common Sale 2 (16 to 20 Seventh Avenue) Mr Jackson rejects direct comparisons with that parcel, which he argues reflects an entirely different market level of value than the subject land. However Mr Crowley sees his Sale 2 (16 to 20 Seventh Avenue) as his primary sale because of the more lightly improved nature of that sale. He argues that the notional application of that sale at $528 per square metre is a conservative application of the analysed value of $571 per square metre. Because of the sale’s inferior location, inferior planning potential height, density and plot ratios, the subject land is clearly a superior site and value. [48] Mr Crowley argues that the nature of the two separate components of his Sale 2 (16 to 20 Seventh Avenue) and the slightly different nature of the ownership of the two parcels, for whatever reason, does not, in his opinion, detract from the usefulness of that combined sale for comparison purposes. He concedes that before development could proceed upon the combined site, there would need to be some rationalization to bring the two titles into single ownership. However he argues that does not discredit the total sale for these comparisons. However he concedes that some caution in its use would be appropriate. [49] Mr Crowley confirms that his Sale 1 (20 Palm Beach Avenue) is used merely as confirmation of his Sale 2 (16 to 20 Seventh Avenue), and also to confirm that relativities between those two parcels can be maintained by the increase of 35% applied to that strip of commercial area. He agrees that where vacant sales exist then the Courts have preferred those to highly improved sales. He also agrees that maintenance of relativity can be compared if the valuations are soundly based. [50] Mr Crowley also agrees that while his Sale 1 (20 Palm Beach Avenue) does have commercial development possible on the ground level, it is a different type of commercial development to that likely on the subject land. He also agrees that a relatively modest tourist type service commercial development on the ground floor in the area of the subject land, could be likely in the current level of the market demand for that area. Decision: [51] There is no difference between the parties in respect of the current use of the subject land, and the maximum possible development constraints under the existing planning controls. -- 13 of 21 -- 14 However there is some difference about whether the proposed changes in the draft plan would effectively influence the mind of a prudent purchaser of the subject land at the relevant date of 1 October 2001. [52] There was also some confusion in respect of analyzed changes in the property market at the relevant date, and also whether the market should be analyzed on an overall perspective, or whether the evidence indicates that the subject land lies within a specific small sub-market area that is different to surrounding areas. A key difference between the valuers would appear to lie in the respective weight to be applied in any analysis of the impact of planning constraints, and the market’s interpretation of that guidance by the Council. The Impact of Planning – [53] Mr Isdale reminds me that the evidence reveals that developers on the Gold Coast tend to develop to the maximum potential of any parcel. He also argues that larger parcels, such as the subject land, are demonstrated to have increased potential to convince the Gold Coast City Council to exercise discretion in allowing the maximum height of development and density of development subject to the consent of Council. In that light he argues that the subject land has the potential to be developed to a maximum of fifteen storeys. He notes also that there is a dearth of such sized parcels to the west of the Gold Coast Highway in Palm Beach. It is that lack of available parcels which, he argues, was likely to be inhibiting any development greater than three storeys to the current time. [54] Mr Isdale refers me also to the decision of the Full Court of Queensland in Stubberfield v Valuer General (1988-89) 12 QLCR 328, where the matter of impending town planning changes was seen as likely to be an influence in the mind of a prudent purchaser contemplating the purchase of the subject land. However I believe that matter can be distinguished in the current matter, as in Stubberfield the proposed change of zoning of the draft Town Plan amendment had been formally and widely placed on public notice prior to the date of valuation. [55] Indeed the details of Stubberfield reveal that Connolly J noted that the Court was to decide “whether the publication of the proposed new Town Plan for the Shire was capable of being regarded as a factor depressing the value of the land” (p.343). There was clear evidence that the proposed new Town Plan went on public display on 16 December 1986 for a period of three months, prior to the relevant date of valuation on 31 March 1987. Under the proposed new Town Plan which was not formally gazetted under 20 February 1988, the subject land in that matter was proposed to change from Residential to part -- 14 of 21 -- 15 Residential A and part Public Open Space. The Full Court found that knowledge of those changes was a matter a valuer was bound to consider in his determination. [56] In the current matter the draft proposed changes to the zoning of the subject land were not formally brought to the public notice until 22 October 2001, after the relevant date of 1 October 2001. Then the draft plan was withdrawn for a period of four months before being re-exhibited in an amended form. While an experienced developer might have some personal knowledge of possible changes to the existing 1994 plan, such speculation was always likely to carry with it an element of risk. A prudent purchaser would build that risk into his appreciation of the value of the subject land. [57] The issue then to be decided in the current matter is what would be the likely highest and best use of the subject land, in the knowledge of the then maximum density of 1 to 33 m², rather than the proposed density of 1 to 25 m² for each unit of development. The highest and best use of the subject land is a factor governing the determination of the market value of the land. Its best use must have legal standing under planning regulations, the use must be within the realm of probability, and of a kind to come within the imagination of a particular purchaser. [58] The current present use of the subject land may not necessarily be its highest and best economic use. (Cieslinski v Minister of Works (1978-80) 39 LGRA 332, per Jacobs J at 337.) The distinction between “market value” and “present value” was also considered by the High Court in Crisp and Gunn Co-operative Limited v The City of Hobart (1963) 110 CLR 538. In that matter the Court considered the matter of whether a factor should be allowed for disturbance in a compensation matter, and concluded at p.547: “Further we are of the opinion that the requirement of the statute that regard should be had in assessing compensation to a number of factors including ‘disturbance and any other matter not directly based on the value of the land’ does not justify the award of any amount for disturbance in addition to the market value of the land where, as here, that value exceeds the ‘present use’ value by an amount in excess of any loss resulting from disturbance.” [59] However in considering any difference between “present use” value and any potential “higher use” value in the current matter, I am drawn to the findings of the Land Appeal Court in Gallagher v Brisbane City Council (1975) 2 QLCR 368. In that matter I believe the Court clearly outlined the nexus between “present use” and “highest and best use” when it said at p.380: “This is a compensation case, following on compulsory acquisition of the subject land, and we commence with the basic proposition that what has to be determined in such a case is, ‘the value of the land to the owner as it existed at the date of the taking, not the value to the taker – and this -- 15 of 21 -- 16 value to the owner consists in all the advantages which the land possesses, present or future, but it is the present value alone of such advantages that falls to be determined;’ Cedar Rapids Manufacturing and Power Co. v. Lacoste (1914) A.C. 569 per Lord Dunedin at p. 576. …Now, while the zoning of land pursuant to a town plan will always affect the highest and best use of land at a particular date, and to that extent the value, it does not create that highest and best use. It may facilitate the immediate realisation of that highest and best use or, at the other end of the scale, it may totally prevent such realisation. In between these two, zoning may work to postpone, or defer, full or any realisation of the value of the highest and best use, until some intermediate action is taken and completed. But, in our view, the highest and best use remains the same throughout, and, on the basis that the highest and best use on resumption date is different from the permitted use as of right of the land under the zoning on that date, the dispossessed owner is entitled to receive the present value of that highest and best use of the land on resumption date, so long as such present value exceeds the permitted use as of right value on that date, where the zoning provisions prevent the immediate realisation of the highest and best use value.” [60] In the current matter we are not dealing with the total loss of the subject land from the appellant, and any value which might flow to the appellant as compensation once and for all for such loss. What we have here is an estimate of the market value of the subject land for purposes of revenue accountability for a specific period of time. The evidence is that the present use of the subject land, and surrounding parcels in the locality west of the Highway in Palm Beach, are only developed to a height of three storeys, well less than the maximum density allowable under the Town Plan. The question is does the present level of uses of those properties reflect their true market value at the relevant time? [61] Now it is perfectly reasonable for a professional valuer to assess the probability of the benefits of a higher permitted use, rather than the existing use, impacting the current market value of a parcel of land. However the probability of realizing that higher use is also a matter for consideration. Where a valuer crosses the boundary into “unacceptable guesswork”, then the higher valuation should be rejected. (Gugusheff v South Australian Urban Land Trust (1990) 55 SASR 268). The test for highest and best use was clearly defined by Jacobs J in Adelaide Clinic Holdings v Minister for Water Resources (1988) 65 LGRA 410, where he said at p.415: “… for the highest and best use means exactly what it says – the most advantageous use of the subject land having regard to planning and all other relevant factors affecting its present and future potential.” -- 16 of 21 -- 17 The Market for the Subject Land – [62] In his final submission Mr Cronin accepts that the subject land has some future potential to a height of seven storeys. However he argues that is not realizable in the current level of the market in this specific area of the subject land. On that point I agree with him that the findings of Chief Executive, Department of Natural Resources and Mines v QNI Metals Pty Ltd & Anor (LAC2002/0038, 12 September 2002, to be reported, have no specific issue in respect of the likelihood, at some time, of the subject land achieving the higher potential of its current land use zoning. [63] In considering the potential for a hypothetical purchase of the subject land, I am reminded that Wells J said in Goode v Valuer-General (1979) 22 SASR 247, at p. 256: “In my opinion, therefore, the sale referred to in the definition of unimproved value is the sale of the land in the market where at least some of the potential buyers are interested in making a use of the land that will realise the highest price.” [64] On that basis it is reasonable for Mr Crowley to consider that there may be some potential buyer for the land. But the probability of such a sale must also be considered, and, as Lord Dunedin said, it is the present value of the land that falls to be determined. (Cedar Rapids Manufacturing (supra)). On the evidence of the market as reflected in the available sales, the probability of achieving a higher level of development in the immediate locality of the subject land west of the Highway is not demonstrated. [65] I cannot agree with Mr Isdale that a correct interpretation of the law must conclude that the history of a lack of use of those lands to a level beyond three storeys, is not a matter for consideration in an unimproved valuation under the Valuation of Land Act 1944. Were the matter one of compensation I would concur; but the process of annual valuations provides for the changing nature of the market place. Indeed the whole process of annual valuations is directed to that purpose. In the end it is the market value at the relevant date of 1 October 2001 which must be concluded. That level of value is best shaped by evidence of comparable sales, preferable in the area west of the Highway in Palm Beach. Comparison of Sales – [66] In seeking guidance in this matter I am well aware of the principles outlined in Grahn v Valuer-General (1992-93) 14 QLCR 327, at p.328 onwards. There is no dispute between the parties that comparable sales of vacant lands are the most useful method of -- 17 of 21 -- 18 determining unimproved value. However it is the comparability of some sales which divides the valuers. {67] Mr Jackson has relied mainly upon larger parcels in the area west of the Highway, where multi-unit developments are possible, and where those larger sites have multi-street frontages, and also front the Gold Coast Highway. He concedes that his key sales do not have Comprehensive Development zoning, where commercial activities can occur at ground level. However Mr Jackson argues that he has made an allowance adjustment for such commercial uses in his application of his sales to the subject land. He saw that as reasonable, bearing in mind the “particularly modest standard” of the commercial nature of the area. [68] Mr Crowley has relied principally upon a sale of lightly improved land west of the Highway in Palm Beach; a highly improved sale adjoining the subject land; and a resort development site in Kirra. I note that in paragraph [44] Mr Crowley draws reference to the demonstrated differential in Broadbeach between Comprehensive Development lands and Resort Residential lands. I note also in paragraph [42] Mr Crowley sees his Sale 3 analyzed at $797 per square metre as superior to the Comprehensive Development zoning of the subject land at $594 per square metre. On that basis I agree that the Kirra market is different to the Palm Beach market, and I get little assistance from the Coyne and Winston Streets sale at Kirra. [69] If I turn then to Mr Jackson’s Sales 4 and 5, I believe any reflected change in the market for such small parcels is unlikely to reflect comparable increases for larger parcels; where a completely different level of development was likely to be contemplated. I agree with Mr Cronin that while both larger and small parcels may be seen to be included in one overall property market on the Gold Coast, their potential purchasers, and final outcomes, reflect entirely different strands of market value. On that basis I reject Mr Jackson’s Sales 4 and 5. [70] If I turn then to the common sale at 16 to 20 Seventh Avenue, I find that has been used for a different purpose by each valuer. It is Mr Crowley’s key sale, while Mr Jackson seeks to reject it because of the nature of the two sales which now reflect its market perception. For the reasons stated by Mr Crowley in paragraph [48] I will accept that combined sale for the purposes of this matter. [71] If I then consider the highly improved nature of Mr Crowley’s Sale 1 (20 Palm Beach Avenue), I believe that the inherent difficulties of correctly allowing for the notional development approach, and possible variations in ongoing rental influences etcetera, suggest that sale has little value, other than some reflection upon the reliability of the 16 -- 18 of 21 -- 19 to 20 Seventh Avenue sale. On that basis I will not consider Mr Crowley’s Sale 1 any further. (Thirty-Fourth Philgram Pty Ltd v The Crown (1992-93) 14 QLCR 13, at p.28). [72] That then leaves Mr Jackson’s Sales 1 and 2 and Mr Crowley’s Sale 2. Those three sales reflect the following comparisons: Sale Area Zoning Applied Rate Comparison 1040 Gold Coast Highway 1,821 m² Residential Multi- Unit $386 per square metre Inferior 1198 Gold Coast Highway 4,244 m² Special Facilities $401 per square metre Inferior (old sale) 16 to 20 Seventh Avenue 1,215 m² Precinct 2 (DCP) $528 per square metre Inferior Subject land 5,050 m² Precinct 1 (DCP) $594 per square metre - [73] If I first consider the different planning constraints allowable in Precincts 1 and 2 of the Development Control Plan, I find that Precinct 1 is seen as the main commercial area of the Palm Beach central area, while Precinct 2 is seen as an interface area between the main commercial activities and the residential areas of Precinct 3. Each of Precincts 1 and 2 have amongst other uses the preferred development of commercial premises, although each Precinct is seen as having “particular characteristics which distinguish them from adjoining precincts”. “The particular characteristics manifest themselves as particular problems and particular opportunities” (s.20.2.1). The only difference in planning terms between 16 to 20 Seventh Avenue and the subject land would tend to be some premium for any advantage that commercial uses could bring by being nearer to the actual commercial centre of that area. [74] In making some allowance for that closer proximity of the subject land, Mr Crowley has sought to also allow some premium for the much larger size of the subject land (5,050 m²), compared to his Sale 2 at 16 to 20 Seventh Avenue at 1,215 m². Mr Crowley argues that “bigger is better” for high rise development purposes, and he has allowed an overall increase to $594 per square metre (12%). [75] If I then compare Mr Jackson’s Sales 1 and 2 I find that, while they have different zonings at the actual date of valuation, they are both proposed to be redesignated as Residential Choice Domain. Allowing for the older nature of the 1198 Gold Coast Highway sale, and its adjustment by the Chief Executive in a rising market to $401 per -- 19 of 21 -- 20 square metre at the relevant date, I can conclude that the difference in size for a similarly designated land parcel at Sale 1 (1,821 m²) compared to Sale 2 (4,244 m²) reflects a premium for the larger size of Sale 2 at about 4%. That is to be compared to 16 to 20 Seventh Avenue to the subject land which demonstrates an overall increase of 12% for both zoning and size. That would suggest that Mr Crowley has made a conservative allowance for the differing quality of commercial activities on the subject land of about 8%. [76] If I then look to Mr Jackson’s adjustment for the commercial benefits accruing in the Comprehensive Development zoning, I find he has allowed 23% from his Sale 1, and 18% from his Sale 2. That adjustment would also suggest that Mr Jackson agrees that the rate for the larger area of Sale 2 (4,244 m²) is also higher than the rate for the smaller Sale 1 (1,821 m²). [77] However I note also that at Broadbeach, although a higher demand area, the difference in the rate per square metre for a Comprehensive Development parcel compared to a high rise residential parcel, can vary up to 100% for the advantage of the allowable commercial activity on the ground level. The balance then to consider is that while Mr Crowley has allowed a premium of about 8% for a better located commercial use; and similar located properties at Broadbeach reflect 100% premiums for that purpose; has Mr Jackson allowed sufficiently for the lack of commercial use at his Sales 1 and 2. On the evidence I believe he has adjusted his applications to the subject land at a low level of premium. Summary: [78} In summarizing this matter I believe that the weakness in Mr Jackson’s conclusions lies in his estimate of the additional premium that commercial activities on the Gold Coast bring to otherwise high rise residential developments. I accept that a professional valuer is entitled to rely upon his knowledge and experience in such matters. (King Ranch Pastoral Co Pty Ltd v The Valuer-General (1968) 35 CLLR 255, at 259). However it is always important to ensure that such judgment is supported by evidence in the market place. [79] That was outlined in the text Land Valuation and Compensation in Australia, Rost and Collins (3rd edition) 1984, which read 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 -- 20 of 21 -- 21 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 also 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 upon opinion”. (p.235/236). [80] It is always therefore important to contrast the personal views and aspirations of the skilled person in land matters, with the views of the so-called “hypothetical purchaser” in the market place. In the end it is the hypothetical vendor and purchaser who establishes the value of land. (See Spencer v The Commonwealth of Australia [1907] 5 CLR 418, where Griffith CJ (p.432) and Isaacs J (p.441) set the principles which have ever since determined how a bona fide sale is to be assessed). In the end the value of a parcel, and the relative value of the locality, must be supported by the evidence of bona fide sales in the free market place. On the evidence before me I prefer Mr Crowley’s evidence. [81] The evidence clearly demonstrates that a parcel located on the busy Gold Coast Highway was likely to have a greater market potential than a parcel such as 16 to 20 Seventh Avenue located further removed from that commercial exposure. On that basis I believe that the rate for the subject land must be greater than the applied rate for 16 to 20 Seventh Avenue at $528 per square metre. In such matters I am therefore reminded that s.33 of the Act directs that the valuation of the Chief Executive is to be accepted as correct, unless proved to the contrary. I am also reminded that under s.45(4) of the Valuation of Land Act 1944 the onus to prove his case rests with the appellant. On the evidence that has not occurred. Conclusion: [82] Having considered the whole of the evidence I am not persuaded that the appellant has proved his case. The appeal is dismissed, and the unimproved value of Lot 1 on SP 108052 as determined by the Chief Executive in the sum of Three Million Dollars ($3,000,000) is affirmed. NG DIVETT MEMBER OF THE LAND COURT -- 21 of 21 --