Victorian Statutory Revaluation
Valuer-General Victoria and Municipal Group of Valuers
Guidelines on Valuation Methodology for
Development Land – Residential and Industrial (in globo)
Introduction
These guidelines are to be used when valuing residential and industrial development land for rating
and taxation purposes.
The guidelines need to be used in conjunction with the General Provisions for Specialist Guidelines,
which refers to the general requirements, legislation and procedures relating to all statutory
valuations.
An acceptable classification for in globo residential and industrial land is summarised below.

In globo residential land
Residential zoned land situated inside the Urban Growth Boundary (UGB) which, although
not subdivided, would find a market if subdivided into a number of allotments or small
areas.

In globo industrial land
Industrial zoned land inside the Urban Growth Boundary (UGB) which, although not
subdivided, would find a market if subdivided into a number of allotments or small areas.
In globo land or subdivisional land is generally considered to be land with characteristics
that would allow its subdivision into smaller parcels.
Definition
The following definition of subdivision is contained in Section 3 of the Subdivision Act 1988.
Subdivision – the division of land into two or more parts which can be disposed of separately.
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And Industrial (in globo) - August 2011
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Victorian Statutory Revaluation
Other definitions and industry terms
Hypothetical subdivision
Hypothetical subdivision is a valuation methodology where a gross realisation of anticipated selling
prices of lots is estimated. To arrive at the in globo land value, the accurate estimates of development
costs (including developer’s profit and risk) and duration of the selling period are then calculated and
deducted from the gross realisation.
Goods and Services Tax (GST)
The GST, introduced on 1 July 2000, is a broad-based 10 per cent consumption tax on the sale of most
goods and services in Australia.
Margin Scheme
The margin scheme is an alternative method of calculating the GST, payable when real property is sold
as part of a business. GST payable is equal to one-eleventh of the ‘margin’, rather than one-eleventh of
the total selling price.
Depending on when the property was purchased and who it was purchased from, the margin is
generally the difference between the sale price and:



the amount paid for the property; or
an approved valuation of the property at a given date; or
the sale price and the value of the real property as at the relevant valuation date (usually 1 July
2000) if the property was purchased before 1 July 2000.
GST law regarding the margin scheme was amended in 2005.
The margin scheme does not apply to the taxable sale of real property if it was not applied by the time
the sale was made:


before 29 June 2005; or
after 29 June 2005, but a contract or granted rights or options over the real property was
entered into before 29 June 2005.
Urban Growth Boundary (UGB)
The Urban Growth Boundary (UGB) indicates the long-term limits of urban development and where
non-urban values and land uses should prevail in metropolitan Melbourne, including the Mornington
Peninsula.
Essentially, it follows the existing boundary defined by urban zones and growth strategies for the
majority of the urban areas in metropolitan Melbourne, including the Mornington Peninsula.
The UGB came into effect in conjunction with the release of Melbourne 2030. Some significant
milestones for the UGB include the following items.

The Interim Urban Growth Boundary was implemented 8 October 2002 and the Urban Growth
Boundary was settled 18 November 2003. It includes five designated growth areas across 17
municipalities. On 4 March 2008 the Victorian Government announced a new Urban Growth
Zone (UBZ) in UGB growth areas to speed up residential development and contribute to the
government maintaining a 10-year supply of zoned land.

Developers in the newly created zone are no longer required to apply for rezoning on
individual blocks of land; instead, planning permits are issued if proposals comply with
Precinct Structure Plans (PSPs) established in consultation with local communities.
Creation of the new UGB was the first step in new planning measures. Incorporating Native Vegetation
Precinct Plans into PSPs, rather than dealing with them separately as an appendix to the planning
process, is another proposed initiative. The growth area councils are:







Cardinia Shire Council
City of Casey
Hume City Council
Melton Shire Council
City of Whittlesea
Wyndham City Council
Mitchell Shire Council.
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And Industrial (in globo) - August 2011
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Victorian Statutory Revaluation

On July 29 2010, amendment VC68 was passed by the Victorian Government to expand
Melbourne's urban growth boundary.

On 16 May 2011 the Victorian Government announced a new process in reviewing possible
urban growth boundary inclusions. The GAA will only review the merits of land submissions
and then refer submissions to a new independent Logical Inclusions Advisory Committee
for final determination and advice to the Minister.
Growth Areas Authority (GAA)
The Growth Areas Authority was established in 2006 as part of the Victorian Government’s plan for
outer urban development, The Growth Areas Authority is an independent statutory body with a broad,
facilitative role to help create greater certainty, faster decisions and better coordination for all parties
involved in planning and development of Melbourne’s growth areas.
Urban Growth Zone (UGZ)
The Urban Growth Zone applies to land that has been identified for future urban development.
The UGZ has four purposes:

to manage the transition of non-urban land into urban land

to encourage the development of well-planned and well-serviced new urban communities in

accordance with an overall plan

to reduce the number of development approvals needed in areas where an agreed plan is in
place

to safeguard non-urban land from use and development that could prejudice its future urban
development.
Precinct Structure Plans (PSP)
Precint Structure Plans are master plans for developing whole greenfield communities. PSPs combine
the rezoning and permit approval process. PSPs deal with roads, shopping centres, schools, parks,
housing, employment the connections to transport and generally resolve the complex issues of
biodiversity, cultural heritage, infrastructure provision and council charges.
Growth Areas Infrastructure Contribution (GAIC)1
Growth Areas Infrastructure Contribution is a contribution on development land payable to the
Victorian Government for the provision of infrastructure in developing areas. The contribution is
administered by the Planning and Environment Act 1987. The Act incorporates changes to provide for
growth areas infrastructure contributions.
There are four types of land that make up the contribution area:

Type A land – land that was brought into the Urban Growth Boundary (UGB) between 28
November 2005 and 31 December 2006 (inclusive), and in an urban development area on or
after 2 December 2008.

Type B-1 land – land that was included in the investigation areas 1 to 6, brought within a
growth area, an UGB and an Urban Growth Zone (UGZ), on or after 2 December 2008.

Type B-2 land – land that was included in the investigation area 7, brought within a growth
area, an UGB and an UGZ, on or after 19 May 2009.

Type C land – any land, that is not type A, B-1 or B-2 land, that was brought within a growth
area and an UGZ, on or after the commencement date of the legislation on 1 July 2010.
Land within the contribution area will have a notice recorded on title. It is important to ascertain the
type of land in the contribution area because it will determine when liability to pay GAIC arises for that
land and the amount of GAIC payable.
The liability to pay GAIC is activated by the first of any one of the following trigger events (GAIC event)
that occurs in respect of land in the contribution area:


1
the issue of a statement of compliance for a plan of subdivision
the making of an application for a building permit in respect of substantive building works or
http://www.sro.vic.gov.au
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And Industrial (in globo) - August 2011
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Victorian Statutory Revaluation

the occurrence of a dutiable transaction relating to the land, for example a land transfer or a
significant acquisition of an interest in the land rich landholder holding land in the
contribution area.
The GAIC rates for the 2011–2012 financial year are:


$82,550 per hectare for Type A land
$98,030 per hectare for Types B-1, B-2 and C land.
The GAIC rates for the 2011–12 and subsequent financial years will be indexed annually based on the
Consumer Price Index. The indexed GAIC amount for each financial year will be published by 1 June of
the preceding financial year in the Government Gazette and will be available on the Department of
Planning and Community Development website www.dpcd.vic.gov.au.
The most recent changes to the legislation [the Planning and Environment (Growth Area Infrastructure
Contribution) Act 2011] makes it possible for all or part of the GAIC to be paid for by the provision of
land, infrastructure or building works rather than in cash. This is referred to as the provision of Workin-Kind (WIK)2.
2
Growth Areas Authority, Info Sheet Growth Areas Infrastructure Contribution (GAIC) WORK-IN-KIND August 2011.
Guidelines on Valuation Methodology for Development Land – Residential
And Industrial (in globo) - August 2011
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Victorian Statutory Revaluation
Additional Victorian legislation and cases applicable to development land
The following legislation is also relevant to this topic:
Subdivision Act 1988
Planning and Environment Act 1987
Archaeological and Aboriginal Relics Preservation Act 1972
Heritage Act 1995
Environment Protection and Biodiversity Conservation Act 1999 (Commonwealth)
Flora and Fauna Guarantee Act 1988
Court cases:
Following are some of the court cases applicable to development land valuations. Each case has the
catchwords sourced from the cited case.

Murdesk Investments v Roads Corporation [2006] VSC 363
Compensation for compulsory acquisition of part of land – Before and after value – Pointe
Gourde principle – Hypothetical zoning – Hypothetical availability of services – Highest
and best use – Comparable sales – Enhancement – Severance – Expert evidence – Land
Acquisition and Compensation Act 1986, ss.40, 41, 43. 3

Brewarrana Pty Ltd v Commissioner of Highways (1973) 6 SASR 541
Compensation – Role of Court – Expert Witness – Comparable Sales – In globo Lands –
Price per lot method – Hypothetical Subdivision method – Allowance for Interest – Profit
and Risk.4

Coastal Estates Pty Ltd v Bass Shire Council – [1993] 2 VR 566
Resumption and acquisition of land- reservation of land for retarding basin and
community use-Compulsory acquisition-Compensation-Method of Valuation-whether
presence of retarding basin affected valuation on pointe gourde principles-whether
solatium claimable by a corporation-whether cost of preparing matter for trial is
expenditure “necessarily incurred” because of acquisition-whether interest suspended for
period of implied grant of extension of time-land acquisition and compensation Act
1986(No121), s40, s41, s43, s53, s57.

Turner v Minister of Public Instruction [1956] HCA 7
Valuation – Residential allotments – Land suitable for sale in sub-division – Resumption –
Principles of valuation – Risk of realisation – Valuation of Land Act 1916-1951 (N.S.W.), ss.
5, 6, 68 – Public Works Act 1912 (N.S.W.), s. 124 – Land and Valuation Court Act 1921-1940
(N.S.W.), ss. 9 (1), 17.5

Closer Settlement v The Minister 1942 (The Land and Valuation Court of NSW)
‘The Valuer’ Vol. 7, Folio 134.
Compensation. In globo land. Method of valuation. Profit and risk. No special value to
professional subdivision.
Other relevant material:





3
4
5
Planning website – http://www.dpcd.vic.gov.au/ > Planning > Planning Schemes > Planning
Toolkit > Statutory toolkit > Practice and advisory notes > Residential, subdivision.
Growth Areas Authority website - http://www.gaa.vic.gov.au/
State Revenue Office – www.sro.vic.gov.au >Taxes & Duties > GAIC
Major developers also have their own websites, for example – the Mirvac Group
www.mirvac.com.au and Stockland www.stockland.com.au.
Information on bioregions can be found at www.dse.vic.gov.au > Conservation and
Environment > Victoria’s Bioregions.
Murdesk Investments v Roads Corporation [2006] VSC 363 at 1
Court Decisions for Examination Study Valuers , Australian Institute of Valuers Inc, 2nd edn, 1984
Turner v Minister of Public Instruction [1956] HCA 7 at 1
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And Industrial (in globo) - August 2011
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Victorian Statutory Revaluation
Identification of properties
Australian Valuation Property Classification Codes (AVPCC)
To appropriately categorise residential and industrial development land in a municipality, refer to the
Australian Valuation Property Classification Codes (AVPCC) available at www.dse.vic.gov.au/valuation.
The following codes apply to development land:
Vacant in globo residential subdivisional land (AVPCC 102)



Unspecified – 102.1
Subdivisional land (multi lot) – 102.2
Subdivisional land (in globo/potential) – 102.3
Vacant industrial in globo land (AVPCC 301)
The valuer needs to appropriately categorise development land in the municipality. The three
suggested categories are:

Development land is land zoned residential and most appropriately valued by sales evidence
within a distinct market group.
There is sufficient sales evidence within a sub-market group (SMG) to set up a development
block table for the land areas where the sales support a higher than residential land value.
To determine these properties the valuer should refer to strategic planning (particularly
overlays) and preferred development criteria within the council, availability of services,
topography etc. For the selected properties, the criteria that supports the selection of
properties to be valued using a development land value table needs to be documented in the
relevant SMG submission.

In globo land is development land that fits the criteria outlined in these guidelines and is
supported by sales evidence. The valuer may determine that the in globo land is development
land greater than a certain land area (with the required attributes as outlined in this
document).
In globo land is usually not driven by market activity with an SMG, but by sales across or
outside the municipality.

Land that is outside the UGB and the sales evidence supporting the valuation on the same
basis as the surrounding land values (i.e. the relevant SMG). Land in this category is frequently
purchased in speculation of future development.
Guidelines on Valuation Methodology for Development Land – Residential
And Industrial (in globo) - August 2011
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Victorian Statutory Revaluation
Property inspection – specific requirements applicable to development land

Ascertain if the property is inside or outside the UGB.

Inspect property.

Availability of services to the site.
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And Industrial (in globo) - August 2011
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Victorian Statutory Revaluation
Methodology
Site value
The site value of a parcel with or without a planning permit should be valued on the basis of highest
and best use and potential value of the property assuming a permit would be granted for the
development, given the underlying land zoning.
Direct comparison methodology
The primary approach is to establish comparability between the subject and sale properties. The
following factors are important considerations:
Zoning/Planning

Current Zoning

Highest and Best Use

Inside or Outside the UGB

Planning Permit/s

Precinct Structure Plan (PSP)

Planning Scheme Overlays

Open space requirements

Section 173 Agreements
Location

Proximity to neighbourhood facilities such as shopping, public transport, schools etc.

Proximity to road network.

Views
Availability of services

The availability of services (water, power, gas and sewerage) to the site.

The proximity of roads and drainage.
Topography

drainage,

aspect,

shape

contour

landslip/erosion

creeks, lakes and/or waterways

influence on subdivisional costs and lot density.
Cultural and heritage issues
It is an offence under certain legislation to damage or destroy heritage sites. The valuer must establish
if any cultural heritage site/s exist/ed prior to development.

Archaeological and Aboriginal Relics Preservation Act 1972 – an Aboriginal Affairs Victoria
form and project report to be provided on survey.

Commonwealth Act powers delegated to Victorian Minister.

Heritage Act 1995 – the Victorian Heritage Register (Section 18) and the Heritage Inventory
(Section 120) relate to non–Aboriginal sites.
Flora and fauna issues


Environmental report/s on native vegetation, flora and fauna and net gain assessment
Approval for removal of native vegetation
The Victorian Government’s policy for native vegetation is outlined in Victoria’s Native Vegetation
Management – A Framework for Action (DNRE 2002) (the framework). The framework is an
incorporated document in all Victorian Planning Schemes. It aims to protect, enhance and revegetate
Victoria’s native vegetation.
The Framework’s main goal is to achieve a reversal, across the entire landscape of the long-term decline
in the extent and quality of native vegetation, leading to a net gain.
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And Industrial (in globo) - August 2011
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Victorian Statutory Revaluation
Net gain is where overall gains in native vegetation are greater than overall losses and individual losses
are avoided where possible. This recognises that although it’s better to retain existing native
vegetation, it is possible to partially recover both amount and quality by active work and therefore
improve the result as a whole. Net gain will be achieved as a result of landholder and governmentassisted efforts to protect and improve native vegetation. In addition, permitted clearing must be
offset in a way that adequately addresses the future impacts of such clearing6.
In applying the policy, there are three key steps for land managers and owners to address when
considering vegetation clearing:



Avoid adverse impacts, particularly through vegetation clearance;
If impacts cannot be avoided, minimise impacts by careful planning, design and management;
and
If clearing must occur, the clearing must be offset.
A planning permit is required to remove native vegetation and the three-step approach is an integral
part of the decision making process relating to such permits7.
DSE has developed a standard approach for estimating the quality of an area of vegetation. Known as
habitat hectares, it measures a site’s condition and landscape context8.
A habitat hectare is a site-based measure of quality and quantity of native vegetation that is assessed
in the context of the relevant native vegetation type. This measure can be consistently applied across
the state. If it is assumed that an unaltered area of natural habitat (given that it is large enough and
within a natural landscape context) is at 100 per cent of its natural quality, then one hectare of such
habitat will be equivalent to one habitat hectare. That is the quality multiplied by the quantity. Ten
hectares of this high-quality habitat would be equivalent to 10 habitat hectares, and so on. If an area of
habitat had lost 50 per cent of its quality (say, through weed invasion and loss of understorey), then
one hectare would be equivalent to 0.5 habitat hectares, 10 hectares would equivalent to five habitat
hectares, and so on9.
State and local planning policy frameworks provide the frameworks for considering native vegetation
issues in the planning system. These provisions require planning and responsible authorities to have
regard to Victoria’s Native Vegetation Management – A Framework for Action.
The Environment Protection and Biodiversity Conservation Act 1999 (the EPBC Act) is the Australian
Government's environmental legislation. The EPBC Act provides a legal framework to protect and
manage nationally and internationally important flora, fauna, ecological communities and heritage
places.
If a proposed development has an impact on any matters of national environmental significance, then
it requires approval under the EPBC Act. The project is assessed by the Department of Sustainability,
Environment, Water, Population and Communities. This approval would be in addition to any state or
local government approval.
Other Considerations



6
7
8
9
contamination
covenants
easements
http://www.dse.vic.gov.au/land-management/victorias-native-vegetation-management-a-framework-for-action
Ibid.
ibid
Native_Vegetation_Management_-_A_Framework_for_Action.pdf
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And Industrial (in globo) - August 2011
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Victorian Statutory Revaluation
Valuation Approach
Scenario 1
If no environmental or net gain report has been provided and a permit has not been issued, the
property is to be valued in accordance with similar prevailing market sales and conditions.
Preferably, sales in the same bioregion as these are more likely to reflect similar species, vegetation
types and conditions. Councils and DSE can provide information on bioregions.
Scenario 2
An environmental report on native vegetation and net gain assessment has been provided; however,
permit is yet to be issued.
In this instance the principles avoid, minimise and offset are yet to be addressed. The report would
most probably be based on a concept plan. Based on this it should have a habitat hectare score
assessment. This is a quantitative measurement of vegetation quality. Using a habitat scoring system
the report should provide a target offset in hectares. The valuer should discuss the target offsets for
on-site and off-site options with the relevant planning department. In this way they can make a better
determination of whether the habitat hectares are required to be maintained on-site; hence, reducing
the developable area. An off-site option is also a consideration. If an off-site option is a consideration
there are numerous sales emerging that suggest developers are purchasing sites in similar bioregions
as offsets for their net gain assessments.
Instead of writing off the value, the cost of purchasing a site with an allowance for maintaining it
(usually for a period of 10 years) can be made in the valuer’s calculation. This is a significant
consideration because developers will opt for the cheaper option in order to develop sought-after land
within the UGB.
If an off-site offset is an unlikely option this is usually because the vegetation or species has a very
high significance, which will therefore reduce the developable area and it should be valued in
accordance with Option 3 below.
Scenario 3
If a relevant authority has issued a permit or the land is in a approved PSP:



Once the permit is issued, the principles ‘avoid’, ‘minimise’ and ‘offset’ would have been
determined. The permit should be investigated to establish the developable area and area
to be preserved for native vegetation or threatened species.
Consider if on-site offsets can be or have been used to offset other requirements such as
open space, particularly with sites that have creek frontage, tree canopies, wetlands or
floodway overlays as this area was probably not developable in the first place.
Adopt an overall rate-per-hectare from sales that reflect similar conditions over the
developable/undevelopable area. Consider any enhancement in value from abutting native
grasslands, environs etc.
Example
Sale in outer south-east of Melbourne. A site of 32.61 hectares. Sold June 2007 for
$11,150,000. Developable area was only 15.3 hectares as the balance was set aside as an
ecological reserve. Sale shows $341,919 per hectare overall or $728,000 per hectare over
developable area.
Capital Improved Value (CIV)
In determining the CIV in a case where a property has improvements to the land, the valuer needs to
determine whether the improvements add any additional value to the land or if the highest and best
use of the land is as development land.
Some of the key elements in determining the added value of existing improvements are:

The position of the improvements on the site – is the building(s) appropriately sited to not
interfere with the most feasible subdivision of the site?

Does the condition of the building make it economically viable to be retained; or, is there
an obsolescence factor (in the case of industrial proprieties) that would dictate demolition
and rebuilding being more feasible?

Are the types of buildings on the site relevant to the proposed future development? For
example, a house on industrial land, regardless of its position or condition, may not add
value.
Guidelines on Valuation Methodology for Development Land – Residential
And Industrial (in globo) - August 2011
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Victorian Statutory Revaluation
Sales analysis
Are there existing buildings on the site and do they add value to the site? If the buildings are
considered to add value then the added value needs to be deducted from the sale price in analysing the
land component. If the buildings are significant and to be demolished then the valuer may consider an
additional value to the sale price in carrying out the sales analysis.
In analysing the sales evidence it is most appropriate to analyse the land value on a rate-per-hectare
basis. It is very important when comparing rates per hectare that the sales evidence has been
appropriately categorised in accordance with the factors listed under the direct comparison
methodology in this document.
GAIC
In order to effectively analyse a sale, it is important for valuers to be cognisant of the GAIC framework
and who is responsible for payment of the GAIC in a Contract of Sale. It is also useful to understand
any negotiations on this issue that may have had an impact on the sale price. Valuers also need to be
mindful of the staging of the GAIC liability throughout the progress of a development. The impact if
any of a ‘Work In Kind’ agreement also needs to be ascertained.
Hypothetical Subdivision
Hypothetical subdivision is a valuation methodology where a gross realisation of anticipated selling
prices of lots is estimated. To arrive at the in globo land value, the accurate estimates of development
costs (including developer’s profit and risk) and duration of the selling period are then calculated and
deducted from the gross realisation.
Two cases sited earlier (The Minister of Public Instruction v Turner and Closer Settlement v The
Minister) acknowledge that ‘where unsubdivided land is suitable for subdivision and no proper guide
to its value as unsubdivided can be obtained from sales of comparable land’ a familiar method is to
assume the land was subdivided by the most suitable method of subdivision and ascertain by reference
to comparable sales of allotments similar to those into which it was assumed to be subdivided, what it
might sell for in subdivision.
An estimate is then made of the costs involved in effecting the subdivision and how long it might take
to realise the land in subdivision. Provision in the estimation is made for charges such as rates and
taxes incurred during the time up until realisation, interest on the purchase price and costs required to
subdivide the land and sell it.
An estimated profit and risk is then applied. It is, however, quite clear there are many speculative
factors in the calculation: the time taken to realise the land may vary more than was estimated,
unforeseeable circumstances may arise in the sale of particular lots or all lots in the subdivision, the
prices are estimates only, conditions may change before the time for sale arises and costs involved in
effecting the subdivision may prove to be less or greater than is estimated.
This was highlighted by Gobbo J in Coastal Estates Pty Ltd v Bass Coast Shire Council [1993] 2 VR 566
at 578:
‘This is productive of much dispute and is an unfortunate trend in valuation practice. It serves to
illustrate vividly why reliance on comparable sales, even where limited in number, is to be preferred to
the hypothetical analysis method if it creates so much uncertainty and speculation.’
It is recommended that the comparable sales approach is the most appropriate method of valuation.
Use of the hypothetical subdivision should only be undertaken with full knowledge of the workings, in
the absence of comparable sales, on the proviso that accurate actual and evidenced information is
known about the subject and sale properties; otherwise, the exercise can be a subjective one.
The methodology requires the following considerations/inputs:

gross realisation/selling prices

selling rates

development costs

purchase costs

holding costs

interest/discount rates

profit and risk allowance.
Guidelines on Valuation Methodology for Development Land – Residential
And Industrial (in globo) - August 2011
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