New South Wales Supreme Court CITATION : Ibrahim v Gigliotti [2003] NSWSC 1100 revised - 28/11/2003 HEARING DATE(S) : 24 November 2003 - 26 November 2003 JUDGMENT DATE : 28 November 2003 JURISDICTION: Equity Division JUDGMENT OF : Gzell J DECISION : Valuation based on sales indictative of land value in the locality preferred to a valuation based on adjoining suburb sales including absolute and near absolute water front properties. CATCHWORDS : REAL PROPERTY - Valuation of land - Market value of residential improved site with water views - Whether sales indicative of land value in the locality are preferable - Whether sales of absolute water front properties are preferable - Whether sales in adjoining suburb showing higher values are preferable PARTIES : Mohsen Mounir Ibrahim (Plaintiff) Agatha Gigliotti (Defendant) FILE NUMBER(S) : SC 5685/01 COUNSEL : Ms JMG Housego (Plaintiff) Mr SM Stewart (Defendant) SOLICITORS : Watts McCray (Plaintiff) Carbone Anderson (Defendant) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION GZELL J FRIDAY 28 NOVEMBER 2003 5865/01 MOHSEN MOUNIR IBRAHIM v AGATHA GIGLIOTTI JUDGMENT 1 The plaintiff and the defendant purchased a residence at 6 Ida Street, Putney, Sydney in May 1999 as tenants in common in equal shares. The parties were then in a de facto relationship. The plaintiff claimed that the defendant's interest in the land was held by her on a resulting trust in favour of the plaintiff. The defendant claimed that allowances should be made for contributions made by the parties to the purchase of the land and their entitlements should be calculated as a percentage of the purchase cost applied to the current value of the property. 2 The parties have agreed on their relative contributions and the allowances to be made. The only element in dispute is the current value of the property. 3 Mark O'Neill qualified as a real estate valuer in 1973. He valued the property at $1,350,000. The land covers 570.3 m2 and is on the low side of the road with a gentle slope down from road level. It has a three level rendered brick and tiled roofed contemporary style residence on it built approximately five years ago with good quality fittings and fixtures throughout. It is in a good state of repair. 4 From the living room on the first floor there is an extensive view over Morrisons Bay to the other side of the Parramatta River. The lounge dinning room on ground floor level has water views somewhat restricted by foliage. There is no water view from inside the lower ground floor. The residence contains four bedrooms, two ensuites comprising toilet and shower, two bathrooms and an in-ground pool. 5 Mr O'Neill confined his search for comparable sales to Putney. He was concerned that sales in nearby Tennyson, isolated by a park from Ida Street, demonstrated higher values because of absolute or near absolute water frontages. 6 He chose the sale of 2 Ida Street, a few doors from the subject site, as indicative of the land value of the subject site. It sold for $830,000 in May 2003. It had an old weatherboard and galvanised iron roofed cottage on a corner lot of 658 m2. 7 Small Street is somewhat to the north west of Ida Street. The sale of No 5 in July 2003 at $990,000, Mr O'Neill regarded as indicative mostly of land value. The lot was, however, considerably larger than the subject site at 743 m2. 8 Stanley Street is to the south west of Ida Street and closer to the river. No 20 sold in July 2003 for $933,000. It had a 50 year old fibro and tile two bedroom cottage on a near level block of 500 m2 backing onto the water front park and suitable for redevelopment. It was, in Mr O'Neill's view, a superior site to the subject property, having unrestricted water views and access to the water through the park. 9 Donnelly Street runs parallel to Ida Street to its north east. No 14 of 550 m2 sold in July 2002 for $870,000. It was in a more elevated position than the subject land but was an older sale. 10 Boulton Street is to the north west of Ida Street and to the south east of Small Street. No 21 sold for $1,310,000 in September 2002. It has a large two storey, two year old rendered brick and tile residence on it. Mr O'Neill regarded the house as superior to the subject premises but the land as slightly inferior. 11 Mr O'Neill arrived at his valuation by a direct application of these comparable sales with appropriate allowances for differences in each property and their sale date. How this was done is not revealed in his report. 12 Mr O'Neill said he checked his valuation by the summation method of adding together the land value and the depreciated value of the improvements. He assessed depreciated improvements at $512,500. Again, how this exercise was carried out, is not explained in the evidence. 13 Graham Stevens became a qualified real estate valuer in 1976. He included 21 Boulton Street in his comparable sales. Like Mr O'Neill, he regarded the improvements as superior to the residence on the subject site but regarded the land as inferior and the property overall as less valuable than the subject site. It had no water views. 14 Pellisier Road runs to the south off Stanley Street. No 50 sold in August 2002 for $1,650,000. Stevens regarded it as indicative of land value. It had a single storey weatherboard and tiled dwelling of smaller size than the subject premises the land at 695.6 m2 being comparable in size to the subject site. Mr Stevens regarded it as inferior to the subject site overall. 15 That site had an absolute water frontage to Morrisons Bay. Mr O'Neill said it was inappropriate to use absolute waterfront properties as comparable sales. Mr Stevens said he had adjusted for this feature. The evidence did not reveal how this adjustment was made. 16 Of Mr O'Neill's sales, with the exception of 21 Boulton Street, Mr Stevens was critical of the fact that they were all indicative of land value and did not address the improvements. Mr Stevens had a figure of $620,000 on the improvements as an insurance replacement value. He said this was a service provided to all clients. He would not comment on Mr O'Neill's $512,500 as a depreciated value saying that he was not a quantity surveyor and had not carried out a summation valuation as a check. He said that summation valuations were generally regarded as irrelevant to residential property valuations. 17 Mr Stevens said that while he would have preferred to rely on comparable sales within Putney, he was forced to look elsewhere because of a lack of what he regarded as comparable sales in the suburb. His other comparable sales were all in Tennyson Point. 18 Bayview Street is to the south east of Ida Street and is separated from it by Morrison Bay Park. No 43 sold in November 2002 for $1,720,000. It contains a 1980's style two storey rendered brick and tiled dwelling on a block overlooking Morrison Bay Park. Mr Stevens regarded it as a superior site overall. At 1,100 m2 it is considerably larger than the subject site. 19 Mr Stevens accepted that there can be differences in land values between adjoining suburbs. He agreed that a street on the boundary of Paddington and Woollahra would be expected to have differing land values on either side of the street. He accepted that land values in Tennyson Point would be expected to be higher than those in Putney. He accepted that 43 Bayview Street had unimpeded access to Morrisons Bay and unimpeded views over the park. He accepted that absolute waterfront land values contained a premium but said that this did not apply to land set back from the waterfront. 20 Beach Street, Tennyson Point runs south east off Bayview Street. No 4 sold in October 2002 for $2,025,000. It contains a well presented modern two storey rendered brick and tiled dwelling of similar size to the subject site with water views from its top level. Mr Stevens regarded the site as superior to the subject site overall. Mr O'Neill pointed out that the site was bigger. At 900 m2 the site was superior as it was on the high side of the road with water views. 21 Deeble Street is almost a continuation of Beach Street running to the south east from where Beach Street meets Tennyson Road. No 1A sold in November 2002 for $2,125,000. It, too, was a well presented single storey brick and tiled dwelling of similar size to the subject site which Mr Stevens regarded as superior overall. It has an absolute water frontage to Glades Bay. 22 Mr O'Neill regarded absolute waterfront properties as of no assistance in determining the value of the subject premises. 23 From the intersection of Beach Street and Deeble Street, Tennyson Road runs generally south. No 156 sold in November 2003 for $1,240,000. It contained a renovated older style rendered brick and tiled dwelling smaller in size to the subject premises on 765 m2. It has water views that are likely to be lost when vacant land opposite it is developed. Mr Stevens regarded it as inferior overall. Mr O'Neill did not agree that it was inferior overall. He was of the view that the land was more valuable and the house less so. 24 The parties have presented the court with a difficult task. Neither valuer explained the basis upon which adjustments were made to their comparable sales to arrive at their valuations. 25 Mr O'Neill's comparable sales suffer the criticism that all but one are directed to land value rather than land and improvements. 26 Mr Stevens' comparable sales suffer the criticism that they include absolute or near absolute water frontage properties and they include properties in an adjoining suburb demonstrating higher land values. 27 The subject site has an area of 570.3 m2. Mr Stevens' valuation of $1,800,000 represents $3,156.23 per m2. Mr O'Neill's valuation of $1,350,000 represents $2,367.18 per m2. 28 Of the comparable sales used by Mr Stevens for which a land area was revealed by the evidence, none approach a value of $3,156.23 per m2. 43 Bayview Street sold for $1,563.64 per m2, 4 Beach Street for $2,250.00 per m2, 159 Tennyson Road for $1,620.92 per m2 and 50 Pellisier Road for $2,372.05 per m2. 29 If one deducts Mr O'Neill's depreciated value of improvements on the subject site, one can infer a land content of $1,468.53 per m2. 2 Ida Street sold for $1,261.40 per m2, 5 Small Street for $1,332.44 per m2, 20 Stanley Street for $1,866.00 per m2 and 14 Donnelly Street for $1,581.82 per m2. Each of those sales addressed land value. 30 That pattern, in my view, demonstrates a greater justification for a land value of the subject site at $1,468.53 per m2 than do the improved sales relied upon by Mr Stevens to justify an improved value of the subject site at $3,156.23 per m2. 31 I prefer the evidence of Mr O'Neill. For the purpose of these proceedings, I find that the market value of the subject premises is $1,350,000. 32 I will hear the parties on appropriate orders that stem from this finding. ********** Last Modified: 12/01/2003 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.