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Land valuation process
Valuations undertaken by Lands on behalf of the Valuer General for rating and taxing purposes are made under the Valuation of Land Act 1916 see http://www.legislation.nsw.gov.au/ These values refer to land value only, which does not include the value of your home or other improvements.
The land value does not generally reflect the full sale price that could be obtained for the property.
Valuation methodology
Most land in New South Wales is valued using mass valuation, where properties are placed together and valued in groups called components. The properties in each component are similar or are likely to change in value in a similar way.
Within each component, at least one representative property is valued individually each year to measure how much the value has changed from the previous year. The change in value is then applied to all properties within the component to determine their new value.
Before undertaking valuations, valuers will inspect and analyse a large number of sales in a locality to gain in-depth understanding of what is happening in the real estate market. This information and the valuers expertise are then used to value the representative property.
Where mass valuation is not appropriate, valuers will individually value the property.
The most direct evidence for assessing land value is to compare the property being valued with the sale price of comparable vacant land sold around the time of the valuation date.
During the valuation process, the valuer will examine the breadth of the real estate market including both vacant land and improved property sales. Valuers make allowance for the added value of any buildings or other structures on the land.
Unsuitable sales, for example those between related parties, are not used to determine land values.
When comparing property sales to the land being valued, the valuer may take a number of factors into consideration. These include:
- The location of the land
- Soil type and land surface (such as slope)
- Town planning controls and constraints on use (such as heritage restrictions)
- Any rights connected with ownership of the land (such as water rights)
- Land size and shape
- Nearby development and amenities (such as parks, views, public transport and busy roads).
Valuations are based on certain assumptions, including the property being vacant. The value of a home or other structures and improvements is not included. However, land improvements as defined in section 4 of the Valuation of Land Act 1916 remain part of the land value, for example clearing, draining and filling of land.
Use of the land
When considering land values, the Valuation of Land Act 1916 requires the land to be valued in relation to its highest practical use.
The permitted use of the land must be taken into account in determining the highest practical use. Where development of the land exceeds current zoning and planning restrictions the higher existing use must be taken into consideration by valuers when determing land value.
Easements
An easement is an acquired legal right enjoyed by the owner of land over the land of another. Land valuations do not take easements into account, as the valuations are required to be made on the hypothetical basis that the land is free of impediments to title. However, the physical effects of an easement, for example transmission lines, access roads and pipes laid for drainage, will be reflected in the land value.
Heritage valuations
Properties listed on the State Heritage Register pursuant to the Heritage Act 1977 receive a heritage value, which is used for rating and taxing purposes.
Division 6 of Part 6 of the Heritage Act 1977 deals with heritage valuations see http://www.legislation.nsw.gov.au/
Statutory restrictions
Statutory restrictions on the use of the land are taken into account when assessing the value of land. Some examples include:
- Planning schemes, for example heritage restrictions imposed by a local environmental plan or other planning policies;
- Crown lease restrictions; and
- Rent-controlled land pursuant to the Landlord and Tenant (Amendment) Act 1948 see http://www.legislation.nsw.gov.au/
Concessions and allowances
Concessions and/or allowances may reduce the value on which you are liable to pay rates and taxes. If a concession or allowance applies to your land, it will be printed on your Notice of Valuation and will be taken into account in determining your rating or taxation liability.
Allowances include:
- Profitable expenditure (onsite/offsite)
- Subdividers allowance
Concessions for restrictions include:
- Restrictions as listed above
- Mixed development apportionment factor
- Mixed use apportionment factor
Each valuation is recorded in the Register of Land Values. To keep valuations consistent, land is valued as at 1 July in the year the valuation is made.
