Housing is now officially the number one industry in Australia. It employs directly, or indirectly, one in four people in Australia, is the number one income source (through taxation) for our governments and a prominent reason our economy continues to thrive.
Now it looks like the Turnbull government is about to reward us with more money in our pay packets through tax concessions which will provide relief for some. Interestingly it comes at a time of record government debt at about $770 Billion (AUD) and no signs of reduced government spending.
We now proceed into 2018 with many analysts and commentators making headlines with the “ex post facto” comments on the falling condition of the property market. So, it appears that the government has decided that it is a good idea that tax payers continue to meet the commitments of over inflated housing prices.
Why wouldn’t they? After all, government revenue now relies on increasing property prices and interest in the property market. The government owes a record amount, cannot cut spending, cannot rely on a sufficient rise in resource prices and is walking a tight rope with China our number one trading partner.
The large portion of the Australian population is fast approaching retirement with blossoming thoughts of high asset wealth in their property holdings, and it appears that the government is happy for the “Australian Dream” to prosper. They don’t have a choice and it means that the personal tax concessions being mooted might really be relief for the government, more than its people.
Strata Schemes Development Act 2015
The introduction of the Strata Schemes Development Act (2015) has been met with a fanfare of support by many Strata lot owners. The changes make it possible for older obsolete buildings to make way to more modern and higher density development.
The Act generally requires development proposal to be tendered and 75% of the Strata Lot owners (calculated by Unit Entitlement) to agree. This would then activate a process by which the Strata Plan could then be terminated and lot owners rewarded with payment.
It seems relatively fair as a majority of seventy-five percent would elect most governments throughout the known world. However, any lot owner who objects has the right to have his concerns addressed by the court. The Act then provides provisions (which are currently uncertain) that pertain to the Courts decision making process. The Court has the right to rule on its interpretation of ‘Just and Equitable in all circumstances”. The term equitable is defined by terms such as just, right, fair and reasonable.
This provision creates a myriad of possibilities and outcomes that may only be resolved by the Land and Environment Court in a Class 3 matter. The arguments are likely to be varied and most certainly involve the valuation principles set out within the Land Acquisition (Just Terms) Act 1991. Issues such as displacement, special value and solatium have long been arguments that now will perpetrate new actions under new legislation.
What might appear on the surface as “Just and Fair” legislation in accordance with democratic principles is likely to provide the Courts, Valuers and the legal profession with a new series of precedents and decisions.
In most cases the legislation will provide a mechanism for gentrification and development with a majority in favour. It will not as many may suggest be a case where the majority will be able to rule un-opposed. There is still protection for the rights and fair treatment of any individual where reason and equity can prevail.
The issue of an easement can provide a headache for most property owners when you don’t understand the rules. Most are not aware that providing an easement today is mostly required by law, much like organising a fence with your neighbour.
Legislation is in place to ensure that easements that are deemed necessary are no longer provided by choice. That doesn’t however mean they are gifted. Importantly, how do we deal with the matter and what beneficial agreement can be reached.
Most Valuers assess easement values based on principles derived through court decisions. In many cases of easement negotiations there is rarely a willing seller. This generally creates a conflict, as a seller has little right to withhold an easement and the buyer must bear all the court costs of enforcing an easement.
Over the years, creation and purpose of an easement have provided valuers with a myriad of issues and arguments on valuation methods and compensation. When considering any methodology Valuers should always have regard to the past decisions made by the courts and in the matters that are pertinent.
What appears to be excluded in their consideration is the cost borne by the applicant in enforcing an easement through the court. Current legislation provides all cost to be carried by an applicant in the matter of securing easements.
In a “land mark” case, costs were awarded against the vendor and in appeal the Court found that the trial judge should not have awarded costs because s88K proceedings are not a claim for damages but rather a claim for an interest in property, for which appropriate compensation was required to be paid. As a result the disposed owner does not have to pay any of the costs associated.
The courts have been clear on their interpretation of the matter of value and mostly to the disappointment of the seller. They consider the practical application of the easement and generally determine a nominal amount as compensation.
Can compensatory value have a better relationship to market value? Does the court satisfy the principles of “willing buyer willing seller” (Spencer V The Commonwealth 1907) in considering the costs of enforcement? Is it appropriate that a Valuer better consider the difficulties in negotiating or enforcing through the Court to provide a possible better outcome for the disposed property owner.
“What would a willing buyer to avoid court costs, pay to a willing seller who is aware that a court assessment may lead to a lesser outcome.”
Under S88K of the Conveyancing Act, the right to an easement is clearly defined, unfortunately the value of such an easement is not as transparent.
S88K easements are the most common situations requiring a Valuers intervention. When faced with the issue of easement, understanding the relationships and costs can provide an opportunity to ensure that a willing buyer may negotiate a better result with a willing seller.
Karvon Partners and their experience, is always available.
Collecting data on the residential Sydney property market is an interesting exercise that vindicates Donald Trump’s view of “Fake News”. It appears that in order to extract accurate information you need to review data for the past six months rather than weekly as provided by the media and property based reporters who call themselves economist.
Sydney is now well entrenched in a downward cycle with the last six months resulting in 10,087 auction sales at an average of $1,067,185 meaning an overall sales total of $10,764,700,000. In comparison the same period last year had about the same total sales from approximately 7,500 sales meaning the average was about $1,300,000.
These figures indicate a greater number of sales are required to generate the same amount as last year. I’ve been reading intently the relative week to week market coverage which seeks to confuse market conditions with rise and fall in property mediums and find too many contradictions to support any other view than the market is deteriorating.
The simple explanation is that more people are seeing their last opportunity to exit this market in view of reasonable prices, before the full brunt of the market correction is felt. My view of the marketplace has not changed in the past two years with this correction looming. The data collected indicates a market place that has already turned and the only support being provided comes from the industry seer’s who have interest in maintaining positive views rather than expressing the anecdotal evidence.
We now see more and more “brave” economists expressing vocally their views, which they have privately held for the past eighteen months. On review it’s easy to see the confusion – the effects of foreign investment combined with developer greed and market fear is a powerful combination that can convolute marketplaces.
An accurate reporting function for the property industry is long overdue. For too many years it has been driven by rumour and those with biased interests to create a sense of panic and apprehension in a market that has been so proudly an Australian icon. Add to this a dose of Government ineptness with an element of greed and when the smoke disappears from the mirror most will see clearly.
Sydney Land Valuation is affected by a mammoth number of public projects underway and there’s nothing to cheer about due to NSW forced land resumptions read below.
NSW forced land resumptions are leaving many households shattered
When Darryl Kerrigan won his historic case viewers clapped and cheered. In Sydney today with the mammoth number of public projects underway, there’s nothing to cheer about.
NSW forced land resumptions are leaving many household shattered and burnt with the Government able to run rough shot over the valuation process. More often I am hearing of property owners who are not being justly compensated by means of legislated methods that require an expert assessment to argue the case successfully.
Unfortunately those with the experience to argue your case with the Valuer Generals Department or in Court (who is the final arbitrator) are quickly being retained by the Government. This excludes them from being available for the land owner.
Unfair, possibly so. This is only one method the government uses to dispossess people from their home or asset. It is in desperate need of review and has been the focus of many Land Acquisition matters in Court over the past three decades. It has been under review since 2013 and was only recently introduced to Parliament with many of the recommendations either ignored or watered down.
“The Just Terms” Land Acquisition Act 1991
Initially drafted to provide “Just Terms”, it appears to favour one side and not the other. The Valuers General department clearly understands the current climate and regime which governs Land Acquisition and Resumption in NSW. It is a myriad of interpretations set through legal precedents established by the courts over the period of the Legislation. These principles fair or unfair rely on judgements at the time and the judgments rely heavily on the Valuer who attends the matter. “You don’t have to be right, just win the argument.”
Knowing how the system works and having the right people working for you is how you win your case in valuation and in life.
So if I had the chance. I’d like to say to Darryl, nowadays “They are Serious”.
By Peter Karvon – November 2016
From the above Auction clearance table (Auctions are the true market indicator), it seems that we have some interesting contradictions that must have some basis for explanation – however given the clearance rates and current real estate talk, it makes no sense!
I like to keep in touch with the Sydney residential market (as it’s where I live) and information is everywhere. Some you can believe and other, like most propaganda, is driven by personal interest.
Above are some of the total sales and monetary volumes for the last three months (sorry I missed a couple) that show averages as calculated from the Australian Property News information provided by Domain. I’ve compared them to last year’s figures and found that we have higher clearance rates but a lower volume of sales. The interesting thing is that the averages are about 20% less than last year.
Now that does not make sense – I’ve been in property a long time and I know that if volume is down, and less people are selling, prices should be on the increase.
Could it be that properties are recovering from a down turn? If so, it was only for a relatively short time and seems to have dropped the averages by more than 20%.
Changes in average prices like changes in median prices reflect movement in the market. What type of movement are we currently experiencing? Is the market bouncing right now? Does that mean we have reached the ceiling and are trying to break through or have we reached the end of our rope?
Anyone want to comment?