NSW Land value drivers for Inner West suburb

Discussion in 'Property Analysis' started by ZenSapphire, 24th Nov, 2019.

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  1. ZenSapphire

    ZenSapphire Well-Known Member

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    Hi PC,

    I'm looking to get a better understanding of land value in an Inner West suburb to work out an offer price and having a reasonable land to price ratio.

    Any suggestions on what key drivers are? How safe is it to rely on the adjusted land values from valuer general?

    So this is what I did:
    1. Looked up a property of interest by valuer general
    2. Put the sales considered in the 'valuation sales report' into a spreadsheet
    3. Looked at cost per metre of the adjusted land value (cost/m L)
    4. Looked at % of land value vs purchase price (land:price)
    5. Added another column for walking distance to station
    If I just look at the top 4 that are 500m of the station:
    • Land is between 202m and 445m
    • Cost/m of land varies between $2989 to $3668
    • Cost/m of purchase price varies between $4404 to $6040 (suburb avg is $5800)
    • Buildings in this area are 100 years old, so the buildings are not worth much and when I looked at them online, none of these 4 look like they have been rebuilt. Do have extensions though.
     
  2. Scott No Mates

    Scott No Mates Well-Known Member

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    You have not ascribed any value to character. You can't build a 100 year old building. Cost does not equal value.

    On what basis has the VG determined land value? Has the scarcity of vacant land in these areas been considered?

    Have you analysed the wider range of results adjusting for circumstances eg related party transactions, sample size is too small for meaningful analysis, mean is possibly not the best measure - (median or modal analysis within confidence limits may provide a better metric).
     
  3. ZenSapphire

    ZenSapphire Well-Known Member

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    This is something I am looking to get my head around too. Yes, the sample sizes they use (at face value) look small for statistical confidence. But this is what they use the charge land tax. Perhaps this is why they are open to the land value being challenged?

    No vacant land in the area. I will look for some knockdown sales as a proxy though.
     
  4. Scott No Mates

    Scott No Mates Well-Known Member

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    Determine a range of what the land is worth. Add back the improvements (house, garage, pool, outbuildings, landscaping, paving, irrigation, fencing etc).

    Sample size is not small, it's gathered from a sample of all sales in the area, they advise of the most comparable sales.
     
  5. ZenSapphire

    ZenSapphire Well-Known Member

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    Oh I didn't realise it only showed most comparable. Thanks Scott!
     
  6. Scott No Mates

    Scott No Mates Well-Known Member

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    Not necessarily - they're reasonable comparisons to justify their position.
     
  7. Thomacino

    Thomacino Active Member

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    When it comes to 'Analysed LV' it is the purchase price less the added value of improvements to and on the land. This is determined by the Rating and Taxing company responsible for the LGA.

    Note the Valuation Sales Report you are referring to does not indicate or determine the final LV in the suburb. The Mass valuation methodology uses a sample size of analysed properties monitored throughout the year to determine a x% increase or decrease to similar properties, called a 'component'.
     
  8. ZenSapphire

    ZenSapphire Well-Known Member

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    Thanks Thomacino. This is useful info.