Key points
- Property investors, holiday home and landowners, and commercial businesses face a spike in their land valuations this year.
- Valuations were taken from July 1 last year, with property values falling significantly since then.
- Homeowners fear council rates and land tax bills will be pushed much higher despite the fact values are falling.
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More than 1500 NSW home owners have lodged objections to property valuations conducted months ago that do not account for recent price falls and could inflate land tax bills and council rates.
Some owners believe the valuations, taken from July 1 last year, are too high, given home values in some neighbourhoods have plunged by as much as 20 per cent.
Investors face a large land tax bill based on months-old valuations.
Land tax payments by investors are based on valuations by the NSW Valuer-General. Owner-occupiers do not pay land tax on their homes but do pay local council rates, although first home buyers can opt to pay an annual property tax instead of stamp duty.
Valuer-General David Parker previously advised owners to collect data about local sales before challenging valuations within the allotted 60-day window.
It comes after NSW Premier Dominic Perrottet proposed a change to how land is valued. At the moment, valuations only consider the land and not the house on top. Instead, the premier proposed to include the house as well.
Sydney’s median house value has dropped 12.3 per cent to a median $1.2 million from June last year to January, CoreLogic data shows. Unit values fell 7.8 per cent to a median of about $769,000 in that time.
Some NSW home owners believe property valuations conducted months ago are too high, given home values in some areas have fallen by as much as 20 per cent.Credit:Jason South
Some of the biggest falls in value were on the northern beaches, such as a 20.6 per cent drop in the Manly statistical region and a 17 per cent fall in the Pittwater region.
A spokesperson for Valuation NSW said 1564 objections had been received so far, equating to about 0.1 per cent of Sydney’s 2.7 million homes. More objections are expected as notifications will be sent until April.
Most objections related to rises in land values, the spokesperson said.
Property investors, holiday home owners or landowners and commercial businesses are affected by the valuations. First home buyers can opt to pay an annual property tax instead of an upfront stamp duty payment when buying a home.
House values have fallen by double digits since July last year, Corelogic data shows.Credit:Rhett Wyman
“The number of objections varies each year,” the spokesperson said. “If a landowner thinks the land value on their Notice of Valuation is wrong, they have 60 days to lodge an objection with Valuation NSW to have it independently reviewed for free, so more [objections] may follow.”
The next valuation will be undertaken on July 1 this year, he said.
Real Estate Institute of NSW chief executive Tim McKibbin has spoken to home owners who are concerned about the rise in valuations.
“There are people, depending on the area, that are very concerned about it,” he said. “I would imagine people will make objections, but whether they’re successful is a different thing altogether.”
Valuations are done as “mass valuations” across Sydney, he said, and do not look at individual properties. They do take the sale price of properties in the area into account.
“Valuations look at the land only, what is the highest and best use of the land, and they apply value to that,” McKibbin said. “You can see there’s part art and part science in it, and it’s not a formula you can produce with any level of certainty.”
McKibbin said investors were already selling, and some were looking to invest elsewhere as the cost of land tax rises.
“The valuations that have been made are certainly going to be higher than they were and, as a consequence, subject to council and government making an allowance for the increase in the land value, they will be paying more in rates too,” he said.
Investor selling would add pressure to an already tight rental market in Sydney, where the vacancy rate was just 1 per cent in January.
“That’s going to have a flow-on effect for a lot of people, including tenants,” he said.
Property Council NSW’s acting executive director Adina Cirson also raised concerns.
“Members are concerned with the massive spike at a time when businesses are already under pressure. The increase would likely be passed onto tenants, which could result in further rent increases,” she said.
“In addition to inflation and cost of construction, this is another bill the industry can’t afford to forecast into development planning,” she said.
The Property Council was heartened, however, by the premier’s plan to shift the way land is valued.
“We would call for a cap on valuation increases in line with the first home buyers’ property tax of 4 per cent,” Cirson said.
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