NSW land values have continued to climb despite prices in the housing market moving backwards.
NSW Valuer General data showed land values increased 4.4 per cent over the year to July but home prices in Sydney, which makes up two thirds of the state housing market, dropped nearly 5 per cent over the same period.
Home prices increased 3 per cent in the rest of NSW, according to CoreLogic.
Land value is an important component of the taxing regimen as the government determines how much to charge eligible land owners based on the valuer general’s independent assessment.
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The higher the value of the land, the more the owners are taxed.
The taxes remain a critical source of revenue for the state government, which collected $6.5 billion in land tax revenue over FY2016/17 alone, Property NSW figures showed.
Housing experts told The Daily Telegraph the land and home markets were not identical but it was rare for them to move in opposite directions.
Both land and home value assessments tended to be measured based on sales activity, which in turn was driven by changes in supply and demand, the analysts said.
A comparison of Valuer General and CoreLogic data showed movements in land values were out of synch with home prices in many Sydney regions.
The Valuer General reported land values increased 7.7 per cent for the year in the CBD area, but prices for all home types in the region dropped 4 per cent.
Land values were also said to have increased 14.4 per cent in North Sydney council, but house prices only increased 3 per cent, while unit prices dropped 0.9 per cent.
It was a similar situation in nearby Mosman where land values, as determined by the Valuer General, went up 11.2 per cent.
This was at odds with independent measures of home prices, which showed Mosman unit values went down 6.4 per cent, while house prices grew 6 per cent.
In Canada Bay, the 6.9 per cent land value increase came as house values dropped 4.7 per cent and unit values stayed unchanged.
Binvested developer and property investor Nathan Birch said it was surprising the valuer general reported increases in land values considering the recent weakness in the market.
“It’s a bit questionable that land values just keep going up,” he said.
“All of the housing market has taken a belting this year. There is a general feeling that (the market) is not in good shape … you have to wonder how land values can go up,” Mr Birch said.
The office of the valuer general said valuation accuracy was tested against a range of checks, with the process quality assured by Property NSW.
Acting NSW Valuer General Michael Parke said property sales are the most important factor considered by valuers when determining land values.
“It is important to note that land value is the value of the land only, and does not include the value of a home or other structures,” he said.
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A spokesperson for Property NSW said “there is no single residential market trend”, adding that there were both increases and decreases in land values across Sydney regions.
Land values decreased by 3.3 per cent in the Canterbury-Bankstown council area and by 3.5 per cent in Ku-ring-gai.
Housing Industry Association economist Tim Reardon said NSW land value increases could have been driven by a shortage of “shovel ready” land. “Sydney has had land supply problems for years,” he said.
Master Builders Australia chief economist Shane Garrett said many factors could have driven an increase in land in some areas, but the discrepancy between overall home price and land value movements was still perplexing.
“Land values would have increased where there has been new infrastructure,” he said. “But on the whole, it goes against what you’d expect. Land values and house prices should be more in tandem.”