Consultant Report - IPART

The WAG submission, related to the discount factor, was based on the analysis of 144 properties from which
a number of conclusions were drawn. The WAG submission did not refer to a specific discount factors,
preferring to report resultant “discount multipliers” instead.
“19. Question ........ to arrive at its suggested discount factor (or discount
multiplier) of 16%, compared to the adjoining freehold PSLV or 33%, compared
to the postcode median SLV”
LPI has addressed the “discount factor” in this review and, for consistency, all references to the WAG
submission were adjusted to reflect a discount factor rather than a “discount multiplier”.
LPI considered that the use of median Land Values from postcodes did not provide the appropriate basis for
determining the value of Waterfront leases. The properties within a postcode vary considerably and may
have little in common with waterfront property. Statutory Land Values for waterfront properties move
independently to non waterfront values and this is not captured by the use of a post code median.
LPI revised the calculations in the WAG submission, on corrected data, based on the options preferred in
that submission but also ran calculations based on options preferred by LPI. This included against the PSLV
(preferred) and the average of the Postcode SLV (preferred to the use of a median).
The revised calculations were not used to inform LPI recommendations for discount factors. LPI’s
recommended discount factors considered the whole of the state where those used for the WAG submission
were concentrated in a small part of Sydney Harbour. As such it was considered preferable to select a more
representative set of benchmark properties for the analysis.
A number of the properties used in the WAG analysis could not be reviewed due to a number of factors
including;
• Property could not be identified on the Register from information provided
• Property was a duplicate of another property
LPI sourced, from the Register of Land Values, all those properties which could be identified, and used in
analysis. This resulted in a reduction to 112 properties.
A number of the properties included in the WAG submission showed Land Values on a per square metre
basis that varied greatly to those of other properties. In many cases, these variations did not accord with the
known value relationships for these locations. Independent of this review, LPI completed a process
requesting review of statutory Land Values by Rating and Taxing valuation contractors, for Land Values of
occupancies used in the WAG analysis for those values which appeared, potentially, to be prima-facie
anomalies. The review process provided recommendation by valuation contractors for re-ascertainment of a
number of 2010 base date Land Values to provide statutory Land Values falling within an acceptable market
range. Of the 112 Land Values identified from the WAG analysis, 37 are the subject of current reascertainment
action. The results of these reascertainments have been reflected in the analysis of data for
this review.
The LPI analysis was completed using 2010 base date Land Values including those values the subject of
current re-ascertainment action. Given the purposes of the IPART review and potential medium term effect,
LPI considers use of the most accurate and reliable statutory Land Value base information to be the most
appropriate evidence base for analysis.
Discount factors in this analysis have been reported rounded to no decimal places.
Investigation of Discount Factor used for determining rentals for Domestic Waterfront Occupancies
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