Coastcam Pty Ltd v Chief Executive, Department of Natural Resources [1998] QLC 61

LAND COURT BRISBANE 29 May 1998 Re: Appeal against Annual Valuation - Valuation of Land Act 1944 - Valuation Roll No 129-11824/22000 - Local Government: GCCC-Gold Coast (AV97-241) Coastcam Pty Ltd v. Chief Executive, Department of Natural Resources (Hearing at Coolangatta) D E C I S I O N Background: This matter relates to a parcel at 60 Horizon Avenue, Ashmore, Gold Coast and described as Lot 593 on RP 154962, Parish of Nerang. The land is situated approximately 0.3 kms from the Ashmore College of the Gold Coast Institute Technical and Further Education (TAFE), 1.5 kms from the Benowa State High School, and 2 kms from the Benowa Gardens Shopping Centre. It has a good central location. The land has an area of 686 square metres, and has good access to Horizon Avenue, which is a bitumen sealed roadway with concrete kerbing and channelling. Town water, sewerage, underground power and telephone services are all connected to the site. The land is zoned as "Residential - Dwelling House" under the Planning Scheme of the Gold Coast City Council of 11 February 1994, and effective at the date of valuation of 1 October 1996. The key issues are changes in the valuation and the comparison of sales. This matter was heard concurrently with another appeal by the appellants (AV97-240), which raised similar concerns. The land is regular in shape with a western aspect to Horizon Avenue. The land rises from Horizon Avenue to the building area and then rises gently to the east towards the rear boundary, which adjoins the TAFE College which fronts Heeb Street. There are good views towards the coast from Heeb Street but, while the subject is seen as well-elevated there are no views of the coast from ground level at the building area upon the subject. The Chief Executive, Department of Natural Resources, issued a valuation of the subject at $88,000 on 10 March 1997. Following an objection the Chief Executive confirmed that [1998] QLC 61 -- 1 of 8 -- 2 valuation on 4 August 1997. The appellant has now appealed that figure claiming the value should more properly be retained at its former value of $80,000. During the evidence the appellants argued that an assessment of the market indicated that an even lower figure could be sustained at between $65,000 and $70,000. Mr D McNaught appeared and gave evidence for the appellant. Mr GJ Albion appeared for the respondent, calling evidence from Mr DT Treston, the Departmental Registered Valuer responsible for determining the valuation. The Evidence: The appellant argues that changes in the unimproved value of the subject bears no direct relationship with changes in inflation, the Consumer Price Index (CPI), or market changes. They note that over the period 1990 to 1997 the unimproved value of the subject had increased from $58,000 to $88,000 (51.7%) or 7.4% per annum. They contrast this with research findings of the Real Estate Institute of Queensland (REIQ) which claim that the median house price on the Gold Coast had increased between 1992 and 1997 by only 3.1% per annum. They note also that the increase for the Ashmore area was only 2% per annum. Mr McNaught also sought support from the sale of an improved property at 47 Horizon Avenue (Lot 631 on RP 154962), which sold in July 1992 for $155,000, and resold in August 1996 for $174,000. That increase reflected an annual increase of only 2.7%. In seeking further to confirm their analysis of the value, the appellant analysed the following sales: •Sale 1 - (6 Miralie Place, Ashmore - Lot 184 on RP 130105). This is a 663 square metre vacant parcel located about 1.8 kms north-west of the subject, and only 200 metres from Ashmore City. The appellant claims the topography, aspect and shape of the sale is similar to the subject. While earthworks have subsequently been required during construction of a new dwelling upon the sale, the volume of that fill is similar to earthworks previously required for the development of the subject. The sale sold on 10 January 1996 for $65,000 which they claim provides a direct comparison with the subject. • Sale 2 - (21 Warrawee Avenue, Ashmore - Lot 235 on RP 138745). This sale is located approximately 1.1 kms north-west of the subject, and is vacant land with an area of 1,018 square metres. It is 0.8 kms from the Ashmore Plaza Shopping Centre and 50 metres from the Ashmore State Primary School. Warrawee Avenue is bitumen sealed with concrete kerbing and channelling, and all services are available. The topography is similar to the subject and is elevated above the road, and is flood free. The sale sold in April 1996 for $105,000, which is claimed, on a direct percentage basis for the lesser area (67%), to represent a value for the subject of $70,350. -- 2 of 8 -- 3 In further support of their estimate of the valuation, Mr McNaught sought four appraisals of the likely selling price for the subject from local real estate agents. These varied from $175,000 to $190,000. Based upon potential buyer interest at advertising public inspections, a likely price of $175,000 was adopted. This, he suggests, represents 2.3% per annum since the property was acquired in 1990 for $150,000, and was in line with the REIQ projections. He claims it is also in line with another recent sale in November 1996 of an improved property at 9 Marlborough Court which sold for $145,000, although details of that sale were unknown. From the estimated value of the improved subject, the appellants deducted the following improvements: Dwelling (246m2 @ $385 per square metre) = $ 95,000 Other improvements (paths, walls, etc.) = $ 10,000 TOTAL = $105,000 Giving an estimated value for the land of $70,000. In support of his valuation, Mr Treston provided the following evidence of sales of vacant lands all zoned as "Residential - Dwelling House": •Sale 3 - (10 Hermitage Close, Ashmore - Lot 26 on RP 801702). This is located O.7 kms from the Ashmore Plaza Shopping Centre and 1.2 kms from the Ashmore Primary School. Hermitage Close is bitumen sealed with concrete kerbing and channelling and all services are available. The sale has an area of 1,037 square metres and is above road level, has a slight fall towards Cotlew Street, is well elevated and is flood free. The sale is in "The Hermitage" residential estate which is seen as more up-market than the subject area. The sale is seen as superior in view of its size and locality and surroundings. The sale sold in September 1995 for $130,000, which after allowing for improvements was analysed at $127,750 and applied at $124,000. • Sale 4 - (21 Warrawee Avenue, Ashmore - Lot 235 on RP 138745). This is the same as the appellant's Sale 2, and is seen as superior to the subject due to its size and shape in spite of its location west of Currumburra Road. The sale sold in April 1996 for $105,000, which after allowing for improvements was analysed at $102,850, and applied at $99,000. •Sale 5 - (3 Mitre Place, Molendinar - Lot 15 on RP 865032). This is located about 3.7 kms from the Ashmore City Shopping Centre and about 7kms from the Ashmore State Primary School. The sale has an area of 619 square metres and is above road level rising then towards the rear boundary. All services are available. The sale is part of the "Cathedral Park" residential estate, adjoining "Bishops Wood" estate, and is close to an industrial precinct. Generally the area is seen as not as attractive as -- 3 of 8 -- 4 Ashmore, and the sale is seen as inferior to the subject due to location, quality of land and situation. Sale 5 is seen as representative of the bottom end of properties in the Central Gold Coast locality. The sale sold in January 1996 for $70,000 which after allowing for improvements was analysed at $69,250, and applied at $66,000. In considering his sales evidence, Mr Treston had rejected Sale 1 (6 Miralie Place) as he considered that sale had certain features which precluded the sale as being a normal "in line" market transaction. He based this opinion on the fact that the vendor was an out-of-State owner who had obtained the property as part of a marriage break-up settlement. There was some inconclusive evidence about the level of marketing that had occurred with the sale, however the new purchaser believed that he had bought well, in spite of an otherwise open market approach to offering the land for sale. Based upon the personal circumstances of the vendor, Mr Treston believes that Sale 1 did not reflect a sale that meets the Spencer test of a not overanxious vendor. There was some difference between the parties in respect of the amount of earthwork filling required upon Sale 1 and the subject. However, Mr Treston had formed his views without a detailed knowledge of earthworks undertaken on the subject, and in the context of the valuation, the amount of filling does not appear relevant. In seeking to compare Sale 5, Mr Treston noted that a sale in that area at $70,000 represented an average for the area and compared reasonably to Lots in Norfolk Village nearer to Beenleigh, and to lots at Stocklands, both of which sell in the range $55,000 to $60,000. Decision: (1) Changes in the Unimproved Value - As noted previously changes in the unimproved value of the land do not appear to align with recorded movements in improved sales. This matter was discussed fully in another matter considered in conjunction with this appeal. (See DR and EJ McNaught v. Chief Executive, Department of Natural Resources - AV97-240). I do not intend to repeat my reasons here in full, but note that the real test is not the percentage increase in the unimproved values, but rather a comparison of the subject with the sales of comparable sites in the vicinity of the subject at the time of the valuation. In respect of the application of the method of applying a deduction for improvements from the estimated value of the improved property, commonly referred to as the "summation method", I again refer to my comments in AV97-240. (2) Comparison of Sales - In comparing sales of vacant or near-vacant lands, both parties have adopted the method -- 4 of 8 -- 5 generally accepted by the courts. (See WM and TJ Fischer v. The Valuer-General (1983) 9 QLCR 44; PH Clough v. The Valuer-General (1981-82) 8 QLCR 70; R and MM Barnwell v. Valuer-General (1990-91) 13 QLCR 13; and Thomas Nominees Pty Ltd v. Valuer-General (1986-87) 11 QLCR 283 at page 285.) I consider first the common sale to both parties (Sales 2 and 4 - 21 Warrawee Avenue). It is agreed that the sale is superior to the subject, however the method of comparison is entirely different. Mr Treston has compared the sale on a site-to-site basis, while Mr McNaughton has sought to compare a percentage area of the sale based upon a comparison of the difference in area between the sale and the subject (i.e. 67%). However, in considering the comparison on a rate-per-square-metre basis, Mr McNaught has considered only one factor (area) which influences the value of the land. It has been found in the courts that comparisons of residential lands are best undertaken on a site basis. This was found by the Land Appeal Court in DF and M Ward v. The Valuer-General (1983) 9 QLCR 48, at page 50: "Sites are valued overall and not on a rate per hectare basis. The experience of the market place reflects the former not the latter practice. " That was also upheld by the Land Appeal Court in Hans and Else Grahn v. Valuer-General (1992-93) 14 QLCR 327, at p.330: "The appellants fail on this point because the appropriate basis for the valuation of a residential lot is not the application of a rate per square metre but an assessment of the unimproved value of each lot as land used for single unit residential purposes. As the Land Appeal Court said in its decision on the appellants' previous appeal (H and E Grahn v. The Valuer-General, AV89-246 and 247, 13 December 1990): 'for the purpose of valuing residential sites, the preferable method of comparison is on a site to site basis and not on the basis of a unit area valued comparison. Site for site comparison should take into comparison such matters as the size of the lots, the situation of and access to the lots, the shape and topography of the lots, etc., and comparisons on a unit area basis do not necessarily reflect valuation considerations for the above features. ' " I turn then to Sales 1, 3 and 5 and note the following comparisons: Sale 1 - analysed $ 65,000 - comparable Sale 3 - analysed $127,750 - superior -- 5 of 8 -- 6 Sale 5 - analysed $ 69,250 - inferior In seeking to understand the apparent inconsistency between the analyses of Sales 1 and 5, I note that Mr McNaughton has accepted Sale 1 as an "arms length" transaction, and believes that the sale reflects the market trend. Mr Treston has rejected the sale based upon the circumstances of the vendor. While I note that the sale occurred as a result of an open market advertising approach, I am also aware that a sale is only prima facie evidence of its value. I note for instance that "Land Valuations and Compensation in Australia" by RO Rost and HG Collins, 3rd Edition, reprinted 1996, page 88 says: "Comparable sales after analysis normally enable the valuer to give effect to his informed opinion as to values appropriate to property being valued. But sales do not always reveal precise information, hence the valuer must rely largely on his own skill and judgment in assessing the utility of transactions in the market which lack clarity as indicators of value. " That principle was also followed in The Chief Executive, Department of Lands v. J and L Lorenzen, (AV93-22), 1 June 1994, unreported, where the Land Appeal Court found at page 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 will 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. " That had also been found in Determination of Rents and Unimproved Values for Conversion Purposes - Perpetual Lease Selections and Grazing Selections - Goondiwindi District (1974) 1 QLCR 45, where the former President said at page 48: "Whilst a sale of a subject property around about the relevant date in normal circumstances is cogent evidence of its value, it is always necessary to check the analysed value against the standard reflected by other sales of comparable properties to ensure that it conforms to the 'norm' of the market. If the sale does not so conform caution must be used in its application and it may be even proper to reject it if it is shown to be a sale out of line with the market 'norm'. This check becomes vital, in my opinion, in times of varying market be it rising or falling or in times of an erratic market. One cannot assume, ipso facto, that the analysed sale figure equates fair market value for the subject purposes. " -- 6 of 8 -- 7 An important principle also to be considered was established in Spencer v. The Commonwealth of Australia (1907) 5 CLR 418, where Griffiths CJ said in the High Court of Australia at page 432: "In my judgment the test of value of land is to be determined, not by inquiring what price a man desiring to sell could actually have obtained for it on a given day, i.e. whether there was in fact on that day a willing buyer, but by inquiring 'What would a man desiring to buy the land have had to pay for it on that day to a vendor willing to sell it for a fair price but not desirous to sell?' It is, no doubt, very difficult to answer such a question, and any answer must be to some extent conjectural. The necessary mental process is to put yourself as far as possible in the position of persons conversant with the subject at the relevant time, and from that point of view to ascertain what, according to the then current opinion of land values, a purchaser would have had to offer for the land to induce such a willing vendor to sell it or, in other words, to inquire at what point a desirous purchaser and a not unwilling vendor would come together. " The key to understanding Mr Treston's reason for rejecting Sale 1 may be found in an understanding of the circumstances of the vendor in that sale. Mr Treston has relied upon his experience as a valuer in deciding to reject Sale 1 because of the apparent interstate residence of the vendor and his personal family situation. He has obtained that information from direct discussions with the purchaser who advised that the vendor was living in New South Wales. However, he made no contact with the vendor to confirm that opinion. He has balanced his knowledge of the special circumstances of the vendor against the opinion of the purchaser that he had bought very well. I am conscious also of Mr Albion's comment that one sale does not make the market. On balance I accept Mr Treston's opinion that Sale 1 does not appear to align with other sales in the area. Based then upon Mr Treston's comparison of Sales 3 and 5 I find that there is no evidence to challenge Mr Treston's opinion of the value of the subject at $88,000. Summary: In accordance with Section 33 of the Valuation of Land Act the Chief Executive's valuation is deemed to be correct unless proven to the contrary. The onus of proving an error in the valuation falls upon the appellants under Section 45(4) of the Act. In the current matter I find that the appellants have failed to prove any error in the valuation. Conclusion: Having considered the whole of the evidence I am not persuaded that the appellants have proved their case. The appeal is dismissed, and the unimproved value of the Chief -- 7 of 8 -- 8 Executive at $88,000 is confirmed. Member of the Land Court -- 8 of 8 --