NSW Valuation System

Mass Appraisal Model

Bruce Helman
Acting Chief Valuer
Purpose of the valuation system
• Provide a base for local council rating and land
tax.
• Contribute to the state’s land information system.
• Independently determine compensation following
compulsory acquisitions of land.
• Provide valuation and property advice to
government.
 Valuation System Governance

• Based on principles of:

– Independence through separation of roles
• Valuer General, LPMA, external contractors,
external review
– Accountability through formal agreements
with documented requirements and
independent review processes
– Transparency through open access to
information
 Role of Land & Property
Management Valuation Services
• Maintain Register of Land Values
• Provide valuation service delivery to Valuer
General through Service Level Agreement
• Provide policy and valuation expertise
• Provide quality assurance to valuations
• Procure and manage contracts
• Manage customer service and objection and
appeals reviews
FIG 15 April 2010
 Valuation System Structure

NSW
Government
Legislative
Legislation & parliamentary framework Legislation &
oversight Ministerial oversight

Advice

Valuer Service standards in

Lands Service definition
Valuation
Service Level Agreement in contracts
General (LPI) Contractors
Policies and
Operations Valuation
Standards
Valuation system Valuation services services
& advice in accordance with
contracts

FIG 15 April 2010

 Valuation System Roles
Valuer General
Statutory responsibilities
Delegated authority

Land and Property Information

Operational management of valuation system

Independent valuation contractors

Valuation recommendations

Rating and Taxing Valuations Determinations of Compensation

Valuation of Land Act 1916 Lands Acquisition (Just Terms
Compensation) Act 1991

Land and Property Information

Quality assurance and issue of valuations

Office of Local Acquiring authorities

State Councils Notices of (State and Local Government)
Revenue Council Valuation
Land Tax Rates Offer of compensation

Individual land holders

FIG 15 April 2010
 Separation of Roles
• Clear separation of roles
• Increasing separation between LPMA
and contractors
• Contractor responsibility to determine
market and deliver completed and
quality assured values

FIG 15 April 2010

 Resources
• Valuation Services has 140 staff to maintain
Register, manage contracts and provide
quality assurance
• 18 Rating & Taxing Contractors servicing 36
rating and taxing contracts
• 3 year contracts with 1 + 1 option
• Provides valuation consultancy services to
government clients

FIG 15 April 2010

 Basis of Valuations
• Valuation of Land Act 1916 as amended
• Section 6A – market value of land excluding
improvements (site value)
• All valuations made at same date - 1 July of each
year – available to rating & taxing authorities during
November
• Mass appraisal system based on components or sub
market groups
• Provision for individual valuations where MA
methodology not appropriate
FIG 15 April 2010
 Basis of Valuations
• Contractor analyses sufficient sales
across the range of market within a
component
• Sample property valued and factor used
to update all in group
• Approx 35000 sales analysed during
2009

FIG 15 April 2010

 Basis of Valuations
• Components based on like properties with
likely similar market movement
• Vary in size from less than 10 to greater than
9000
• One benchmark per component
• Reference benchmarks to test values across
range
• Requirement set in contract
FIG 15 April 2010
Component Quality Assurance

• QRP - The relative measure of variation within the

inter-quartile range.
QRP = QRANGE / Median Value x 100

FIG 15 April 2010

 Land Value Verification
Program
• Objective - to improve the valuation data to
ensure the most accurate application of mass
appraisal methodology
• 1.9 million land values individually reviewed
since 1 May 2006
• Challenges in managing balance between
valuation quality and timely review

FIG 15 April 2010

 Review & Approval
• Standards and delivery requirements set out
in contract and Procedures Manual
• Valuation Services manages valuation
contracts
• Monitors contractor progress throughout
valuation program
• Reviews quality at provisional and final
• Approval after meeting delivery quality
standards
FIG 15 April 2010
 Quality Assurance
• Contractor values monitored throughout the
year’s program
• Quality assurance by regular program
• Audits focus on procedure and process to
ensure that quality outcomes are obtained
• Are formal investigations into valuation
process or outcomes

FIG 15 April 2010

 Quality Assurance
• Two types of audit
• Formal program audit from program
• Audit arising from issue identified
• Written report containing recommendations
issued to contractor for comment and
action/rectification
• Actions logged and followed up

FIG 15 April 2010

 Quality Assurance
• Internationally recognised statistical tests
• Coefficient of Dispersal COD measures variation of
values
• Mean Variation of Price MVP measures relationship
between sale and value
• Price Related Differential PRD measures variation
across the value range
• Variation from price – measures variation between
sale properties and non sale properties

FIG 15 April 2010

 Improvement in Standards
• Percentage of LGA’s meeting Qualitative Statistical Standards
(2004 – 2009)

COD RESIDENTIAL – From 21% to 96.6%

BUSINESS - From 31.5% to 94.4%

MVP RESIDENTIAL - From 54.3% to 96.6%

BUSINESS - From 34.85 to 88.8%

PRD RESIDENTIAL - From 32.4% to 84.5%

BUSINESS - From 35.9% to 74.8%

FIG 15 April 2010

 Results of Improve Quality
Assurance
• Decreased ministerials
• Decreased correspondence from public
• Increased positive comments from public
• Improved qualitative statistics (2004 to 2009)

- COD: RESIDENTIAL – From 23.8 to 4.6

BUSINESS - From 29 to 6.7
- MVP: RESIDENTIAL - From 87 to 95.6
BUSINESS - From 78 to 92.9
- PRD: RESIDENTIAL - From 1.15 to 1.02
BUSINESS - From 1.22 to 1.09

FIG 15 April 2010

 International Standards
• Statistical standards that are adopted are
recognised internationally
• Australian Property Institute provides
standards documents for Rating & Taxing
Valuation in Australia/New Zealand
• Valuer General has Land Value Improvement
Committee to determine statistical standards
and methods of imroving quality assurance

FIG 15 April 2010