What's The Added Market Value of a View?

WHAT'S THE ADDED MARKET VALUE OF A VIEW?

By John Leeson
Certified Practising Valuer

ABSTRACT

Our instruction was to assess the added market value of a view associated with residential property in Brisbane as at 2004.  What is the value that the market will pay and what is the quantum?

We analysed sales evidence in two (2) new high rise residential buildings, where the unit sales occurred in a relatively narrow time frame and were identical units, other than the variation of the view.

Sales analysis revealed that there was a noticeable change in value when the quality of view changed.

The variations in added market value in 2004 ranged from 6% to 21.1% when the quality of view changed from impeded to unimpeded view.  The lower range was for secondary suburban views and the upper range was for superior quality river/CBD views.

Further sales data analyses was undertaken for period 2010-2012 on the same buildings to establish if the outcome was stable in a different market environment.

INSTRUCTION TO ASSESS ADDED VALUE OF A VIEW

We were approached in 2011 to undertake an assessment of the added market value of a view in relation to a litigation claim that had been lodged in the Supreme Court of Queensland.

The claim revolved around the variation in value of "as is" with restricted views and the "as if" unimpeded city views.  We were requested to assess the quantum of the "added value" of the city view.

During our preliminary research, we were unable to find any relevant market analysis of the added market value of a view.  We did locate two theoretical analyses by way of Regression Analysis of sales data by two University academics in the United States, in the late 1980s and mid 1990s.  However, investigations of the analysis revealed that the improvements on the properties concerned were single residential dwellings that had significant variation in size, construction materials and overall quality.  The researchers applied their own adjustments to the sale data in an endeavour to reflect the variations.  As a consequence, it was considered that the analysis outcomes were less reliable due to the various adjustments applied, and were not considered a true reflection of added market value of a view.

SUBJECT PROPERTY HISTORY

The property was located in South Brisbane approximately 2km (radial) south of the Brisbane GPO.  The property was contracted to purchase in mid 2004 during construction (roof on stage) with no internal fit out.  Settlement occurred on practical completion towards the end of 2004.

The property was improved with a new three level home.

Accommodation to upper level comprises:  2 bedrooms, ensuite, 2 walk-in robes and balcony.

Accommodation to middle level comprises: Entry, living, kitchen, dining, 1 bedroom, ensuite, toilet, office, ensuite, media room, store room, balcony and terrace.

Accommodation to ground level comprises: 2 bedrooms, 2 x ensuites, family room, terrace, gymnasium (in garage) and 4 car lock up garage.

It was considered a superior quality three level new (to be completed) dwelling as at date of contract.

On entering the subject dwelling on the middle (living) level, this level is a split level, with 6 steps down to the kitchen, dining, lounge and terrace/balcony area.  This level of the house is "open plan".  From the kitchen, dining and lounge areas of the dwelling, there is no view/outlook, other than the rear wall of the dwelling on the adjacent lot (rear).

COMMENTS

As at date of contract the adjacent property (rear boundary) incorporated an existing older dwelling at street frontage and the rear of the site had been excavated and cleared.  Approved plans from Council records indicated by Elevation plans of the proposed dwelling, that the roof height was to be approximately in line with the floor level of the middle (living area) of the subject property.

The "as constructed" dwelling roof height varied somewhat from the approved plans provided to the purchaser prior to going to contract.

The subject property has a 6 metre set back from the rear boundary.  The rear wall of the rear property has approximately 3.8 metres set back from the rear boundary alignment.  Consequently, the rear wall of the offending dwelling is approximately 9.8 metres from the northern edge of the subject's terrace/balcony.  The width of the rear wall of the offending property is approximately 11.9 metres with a 2 metre side boundary clearance.   The subject property's deck/balcony has a width of 6.9 metres with a 1.5 metre side boundary clearance.

As a consequence, the view from the balcony of the subject property, is limited to suburban views to the north-west and north-east. There are no northern views towards the Brisbane City CBD.

We sighted a street view north from the subject property, prior to the subject dwelling being constructed (copy annexed to this report).  The street view shows a full city view.  We sighted photographs taken from the lounge areas of subject, prior to practical completion of dwelling, showing available city views in background.

We also sighted the city view that is available from the middle balcony (similar level to subject) of adjacent dwelling.  That city view is partly impeded by the rear wall of the offending dwelling (copy of photo annexed to this report).

The subject property retains its city and suburban views from the upper level balcony.  The outlook from the ground level of subject was always to be restricted by the dwelling on the rear lot.

DEFINITION OF VIEW QUALITY/VARIATION

All the unit sales analysed had a view, including the low rise units which had restricted/impeded views between/around nearby buildings.

The variation in view quality resulted where the higher up the building, and in the same vertical plane, the views changed from impeded to unimpeded as a consequence of exceeding the height of the building in front that restricted the view.

The secondary/lower quality view was considered to be a suburban view with a western outlook.  Suburban views to the north-west, east and south-east were considered lesser quality views than city/CBD and/or river views.

Unimpeded wide angle city/CBD and full length city reach river views were considered superior quality views.

ANALYSIS

In an endeavour to arrive at the "added value" of the city view to reflect the variation between the "as if" unimpeded city views and the "as is" restricted/impeded view, we analysed sales of properties with restricted/impeded and full views.  The analysed sales occurred in late 2002, 2003 and 2004, in an endeavour to find what the market's "added value" for a view that was present, at that period of time.

We analysed sales in high rise residential buildings on the Brisbane City fringe.  Units with the same floor plan,  size and located within the same vertical plane within the building were analysed.  Additionally, the buildings were new, and it was assumed that the units were to be finished to a similar standard of fit out.  The buildings that we analysed were the "Aurora Tower" 420 Queen Street, Brisbane and the "Skyline Apartments" 30 Macrossan Street, Brisbane.  The "Aurora Tower" was actively marketed "off the plan" in late 2002 and 2003, with a substantial quantity of sales occurring in a relatively narrow time frame. Units in the same vertical plane, had restricted views, impeded views and unimpeded views.

Additionally, units had secondary/western suburban views and superior city/river views.  The only variable in the analysis was the variation in views on the same vertical plane.  Sales of units with comparable floor plans, in three different vertical planes were analysed.

The "Skyline Apartments" building is located one building back from Brisbane River frontage.  Units on the lower levels have impeded/restricted views by the river front buildings ("Admiralty Towers" and "Admiralty Quays").

Sales of units with comparable floor plans in 2 different vertical plans were analysed to reflect the variations in value from units with impeded views to those with full unimpeded views. Details of the full analysis of sales data is included in this report.

A summary of the sales analysis is as follows:

"Skyline Apartments"

A) The variation between Lots 142 and 132 (levels 14 and 13) when the view changes from an unimpeded view to an impeded view was a 21.1% reduction in value.  The unimpeded view was full length river city reach/CBD view.  The impeded view was a restricted river view between buildings.

Further analyses of sales evidence on the eastern end of the building reflect a more subtle change in values when the view changes. The view from levels 24/25 down, is restricted.  The view from level 27 up is unrestricted 180 degree views.  The improvement in the view was Storey Bridge/suburban views to the east.

The variation between Lots 274 and 254 when the view changes is 9.3% reduction in value for the restricted view (view restricted by "Admiralty Quays" building, but over  "Admiralty Towers" building.  City reach river view existed below Level 27 but no Storey Bridge/suburban views to east.

"Aurora Tower"

B) The majority of units have an eastern outlook/view and Unit "8" (back of building), has a western suburban view.  The western/suburban view is considered a secondary/inferior view.

The variation in the restricted (Lot 88) and unrestricted view (Lot 98) reflects a 6% reduction in value.  We are of the opinion that the smaller variation in value reflects the secondary/lower quality view.

Unit "5" has impeded river and city views on lower levels.  The variation between Lots 285, 295 and 365 when the view changes was 10% and 6% respectively.

Unit "6" is a corner unit with impeded city and river views on lower levels.  Variation in values between Lots 306 and 286 when the view changes is 9.2% reduction in value from an unimpeded to an impeded view.

OUTCOME

As a consequence of the sales analysis, it is apparent that there is a noticeable variation in values for a comparable property with impeded and unimpeded views.  The variations range from 6% reduction for the secondary lower quality view to 21.1% variation when view changes from a full 180 degree city/river/suburban view to an impeded view.

Note that we only analysed sales evidence that occurred in the specified time period, so that the evidence is not distorted by market value movements.  Sales evidence that occurred beyond the relevant timeframe was disregarded for our assessment purposes.  Additionally 2 sales were disregarded as evidence for being "out of line" and confirmed as unreliable sales.

The analysis reflects that there is a greater variation in values when there are superior/good views.

SALES ANALYSIS INFORMATION

Sales Analysis - 30 Macrossan Street, Brisbane "Skyline Apartments"

The property comprises a high rise residential tower of 53 levels 6 basement car parking levels, ground floor, retail and entry and 47 levels of residential.

The property is located 1 Lot back from the Brisbane River frontage with lower level units having restricted/impeded river/city/Storey Bridge views between 2 buildings.

The building adjacent to east is "Admiralty Quays" 32 Macrossan Street and the building to south is "Admiralty Towers" 35 Howard Street.

A significant proportion of Skyline Apartments were sold "off the plan" in 2004.  The building was completed in 2007.  The valuer has analysed sales in 2004 of units with identical floor plan on the same vertical plane within the building eg: unit 2 on various floors.  Note:   that not all unit 2's were pre-sold in 2004.

Analysis of sales reflects the variation in values from an impeded/restricted value eg: behind "Admiralty Towers" to those units with unimpeded views (eg: above/over "Admiralty Towers").

Note:  the prefix of unit/Lot number reflects the floor level within building eg: Lot 32 is on the 3rd floor.  All units have a living area of 87m² and balcony area of 15m².  We have assumed all units are completed to a similar standard/quality of fit-out.

The only known variable is the level within building and view:

LOT NO	SALE PRICE	SALE DATE
62	$405,275	09/09/2004
92	$400,000	17/09/2004
112	$404,000	17/09/2004
*132	$404,000	24/08/2004
*142	$512,500	05/09/2004
162	$517,500	21/07/2004
172	$520,000	13/08/2004

* Variations between Lots 132 and 142 when views change was 21.1% reduction in value from an unimpeded to an impeded view unit.

Additionally, we analysed sales of units on the eastern side of "Skyline Apartments".  The sales evidence reflects a similar variation, albeit at a higher level, when the view became unrestricted by the "Admiralty Quays" building. The sales analysed were of Unit 4 on the various floors.  Units comprises a living area of 101m² and balcony area of 18m², all located on eastern corner of building.

LOT NO	SALE PRICE	SALE DATE
144	$665,000	03/12/2004
174	$605,250	01/09/2004
244	$690,000	09/01/2004
254	$685,000	09/08/2004
274	$755,000	20/08/2004
Note: From Level 28 becomes Unit 3 - Living Area 101m2 & Balcony Area of 19m2
343	$799,000	20/08/2004

The view from levels 24/25 down is restricted.  The view from level 27 up is unrestricted 180% views.

The variation between Lots 274 and 254 when the view changes is 9.3% reduction in value from unrestricted to restricted (view restricted by "Admiralty Quays" building, but over "Admiralty Towers").

Sales Analysis 420 Queen Street, Brisbane City - "Aurora Tower"

The property comprises a high rise residential tower of 72 levels 9 levels car parking/retail and ground level entry 63 levels residential.

The units on the south-east of building have impeded views on lower levels.  The units on the western side of the building have an impeded (restricted by adjacent mid rise commercial building) outlook on lower levels, than a suburban view to the west.

Western Outlook Unit 8

Living Area:  71m² and balcony area of 14m²

LOT NO	SALE PRICE	SALE DATE	OUTLOOK/VIEW
*88	$274,000	05/11/2002	Restricted Outlook
*98	$291,500	25/11/2002	Suburban view west
108	$294,000	28/01/2003	Suburban view west
118	$269,500	09/12/2002	Suburban view west
128	$299,000	03/10/2002	Suburban view west

*Variation between Lots 88 & 98 when view changed was 6%, reduction in value for secondary view.

Eastern Outlook Unit 5 Impeded River views on lower levels

Living area:  68m² and balcony area of 14m².

LOT NO	SALE PRICE	SALE DATE	OUTLOOK/VIEW
165	$309,000	08/11/2002	Impeded river views
185	$314,000	21/10/2002	Impeded river views
Note: Level 19 upwards has a living area of 68m2 & balcony area of 23m2
195	$316,500	28/01/2003	Impeded river views
215	$330,000	04/11/2002	Impeded river views
225	$324,000	04/11/2002	Impeded river views
235	$326,500	11/11/2002	Impeded river views
255	$331,500	10/10/2002	Impeded river views
265	$334,000	28/01/2003	Impeded river views
275	$336,500	22/11/2002	Impeded river views
*285	$339,000	18/11/2002	Impeded river views
*295	$377,000	31/10/2002	Unimpeded views
*365	$401,500	03/10/2002	Unimpeded views
375	$435,000	11/11/2001	Uimpeded views
405	$405,500	24/10/2002	Unimpeded views

*Variation between Lots 285, 295 & 365 when view changes was 10% and 6% respectively reduction in value from an unimpeded to an impeded view.

South-Eastern Outlook Unit 6 Corner impeded City and River views on lower levels

Living area:  87m² and balcony area of 20m².

LOT NO	SALE PRICE	SALE DATE	OUTLOOK/VIEW
216	$391,500	25/11/2002	Impeded city/river views
236	$396,500	29/11/2002	Impeded city/river views
246	$414,000	02/11/2002	Impeded city/river views
*286	$409,000	02/12/2002	Impeded city/river views
*306	$450,500	11/11/2002	Unimpeded views
316	$454,000	18/11/2002	Unimpeded views

*Variation between Lots 286 & 306 when view changes was 9.2 reduction in value from an unimpeded to an impeded view.

FORMULA

Sales data for identical units in the same vertical plane within building and that sold within a relatively narrow time band where listed on spreadsheet.  Not all units in the vertical plane sold in the specified time frame, and as a consequence, these were not included in the analysed data.

Sale data of units above and below where the changes in the quality of view occurred are listed to show that there are only minor sale price variations other than when the quality of view change is apparent.

The percentage variations were arrived at by subtracting the difference in sale prices and this resulting figure as a percentage of the higher value unit.

The analysis reflects the conservative reduction in value of the restricted view.  If the variation in value was applied against the lower valued unit, the percentage change to reflect its increase in value would be slightly greater.  In "Skyline Apartments" the increase in value from Lot 254 to 274 would be 10.2% when analysed against the lower value unit, rather than a 9.3% reduction in value when applied against the higher value unit.

For analysis purposes we have adopted the conservative approach and analysed the variation as a reduction in value from unimpeded views to impeded views.

FURTHER RESEARCH

Sales Analysis 2010 - 2012

Our theory was not tested in Court as the claim was settled prior to the hearing commencing.  We undertook further sales data analysis in an endeavour to substantiate that the original outcome was stable or varied at different time and market sentiment.

We analysed sales data for the period 01/01/2010 to 30/06/2012 for the same two buildings and the same unit numbers.  All sales in the later research were resales, and for research purposes all units in the same vertical plane were considered to be of a comparable standard.  One sale was included in the data but rejected for analysis purposes, as it was considered "out of line" and appears to be a "forced sale".

Details of the full analysis of sales data utilised is included in this report.

A summary of the analysis and outcome of this later data is as follows:

"Skyline Apartments"

Sales Analysis - 30 Macrossan Street, Brisbane "Skyline Apartments"

Resales Period 01/01/2010 to 30/09/2012

Unit "2"

LOT NO	SALE PRICE	SALE DATE
62	$645,000	29/03/2010
92	$620,000	14/09/2010
142	$589,000	25/07/2011
152	$605,000	22/12/2011
182	$676,500	01/06/2010

Unit "4"

LOT NO	SALE PRICE	SALE DATE
144	$720,000	28/06/2010
154	$745,000	07/04/2012
164	$745,000	02/07/2010
204	$755,000	24/03/2011
264	$750,000	02/06/2010
274	$770,000	20/05/2010
NB. From Level 28 becomes Unit 3 Living Area 101m2 & Balcony Area 19m2
343	$830,000	09/07/2011

Six '2' unit resales occurred in the period.  Three resales were identical units to those analysed in our 2004 data.  (Note 1 sale rejected for analysis purposes).

The variation in values from Unit 182 to Unit 92 which occurred within a 3.5 month period was an 8.3% reduction.

Eight '4' unit resales occurred in the period.  Three resales were identical units to those analysed in 2004.  The variation in value from Unit 343 to 274 was 7.2% in 2010/2011 a 14 month period.

Outcome

The variation in values for the view declined on resale from 21.1% to 8.3% for "2" units and from 9.3% to 7.2% for "4" units.

"Aurora Tower"

Sales Analysis 420 Queen Street, Brisbane "Aurora Tower"

Resales Period 01/01/2010 to 30/09/2012

Unit "8"

No resales recorded.

Unit "5"

LOT NO	SALE PRICE	SALE DATE
155	$450,000	14/10/2010
305	$467,000	27/09/2011
NB. Level 19 onwards has a living area of 68m2 & balcony area of 23m2
365	$490,500	09/05/2010
505	$555,000	26/09/2011
515	$575,000	30/11/2010

Unit "6"

LOT NO	SALE PRICE	SALE DATE
156	$512,000	10/08/2010
236	$515,000	16/11/2011
246	$525,000	05/11/2010
256	$526,000	15/10/2010
266	$525,000	17/02/2011
316	$582,500	09/06/2012
356	$600,000	30/04/2012
396	$670,000	02/08/2010
406	$650,000	21/05/2010

There was no sales evidence of the "8" units which was considered the inferior suburban view units, within the nominated time period.

"5" unit resales occurred in the period.  Unit 365 occurred in both data sets.  The variation in values from Unit 365 and 155 when the sales occurred within a 5 month period in 2010 was 8.25%.

"6" unit resales - Three sales were identical units to the 2002 data.  For analysis purposes we have utilised the resales of Unit 316 to 236 which occurred within a 7 month time frame and reflected an 11.6% variation

Sales of Lots 236 & 316 occurred in both study periods.  The variation in 2011/2012 was 11.6% and 12.7% in 2002.

Variation between Lots 316 and 266 when view changes was a 9.9% reduction in value from unimpeded to an impeded view.

Outcome

The variation in values for the view for unit "5" was 8.25% in 2010, and in 2002 the variation ranged from 6% to 10% reductions in value.

For Unit "6" the variation in values for the view change was 9.9% in 2011/12 and in 2002 the variation was a 9.2% reduction in value from an unimpeded view to an impeded view.

ASSESSMENT AND CONSIDERATIONS

We were instructed to provide an "Historical Market Valuation" as at mid 2004 "as if" unimpeded city views from middle level of living/balcony area of dwelling and "as is" with restricted/impeded city views from middle level of living/balcony area of dwelling.

The middle level of dwelling is considered the main living and entertaining area of dwelling and the views that are/were available from the living room and balcony are considered to have considerable added value to the property.

The property was purchased mid 2004 for $1,845,000.  The purchaser advised that the contract price was arrived at by negotiation and was an "arms length" transaction.  Full consideration for the property was cash on date of settlement.

We inspected comparable style/quality properties that sold in 2004 to confirm that the contract price was in line with market.  The contract price was also confirmed by the sale of adjoining property for $1.9 Million in October 2004 - new similar style/quality dwelling, same size land and similar city and suburban views.

CONCLUSION

Analysis of the market sales evidence reflects a change in values for a variation in view, ranges from 6% to 21.1%.  As a consequence of analysing sales data of identical property ie same floor plan, size, new (assumed similar standard of fit out), same vertical plane location in building and occurring within a relatively narrow time frame so as not to be distorted by market movements, it was apparent that the market place was prepared to pay for variations in quality of a view.

As property professionals, we are all aware that a view has value, however it is difficult to quantify its value.

However, by analysing directly comparable sales evidence, where the only real variable is the quality of the view, it has been possible to assess the quantum of the added market value of a view.  The majority of variation was in the mid range of 10+% added value for the variation in view.  However where there was noticeable variation in view ie from full view to restricted view, the upper end of the market range is apparent.  Also secondary quality views, ie suburban to the west, the added value was at the low end of the variation range.

We considered that the study needed to be repeated at a different time to assess if the added value percentage was a stable outcome, or varied depending on market sentiment at the time of the sales evidence study.

Our original study was conducted in the period 2002 and 2004 and our follow up study was in the period 2010 2012.  The increased time frame for the later study was to achieve sufficient sales data to enable an analysis to be completed.

The extreme 21.1% variation in the added value may be as a result of marketing by the developer of the "advantages" of the view.

The resales 2010 2012 analysis reflects a minor reduction in "added value" for the variation in the quality of the view.  The later data reflected variation in value from 7.2% to 11.6%.  The majority of variation for the earlier data was in the mid range of 10+% added value for the variation in view quality.

The later analysis that indicates a range of 7.2% to 11.6% for resales is considered a stable outcome, albeit a slight decline in added value.  This may be reflective of marketplace sentiment which was more sombre in Brisbane in 2010 2012.

An explanation as to the wide variation in the percentage added value appears to reflect the variations in the quality of the view.  The lesser quality suburban views to the west have the lowest added value.  The upper range added value reflects the quality of the unimpeded city reach river and CBD views.  The added value changes in the mid range views, although at higher floor levels, the improvement in the quality of views was predominately river/Storey Bridge/suburban to the east, away from CBD and therefore the added value was more subtle.

Note:  Our analysis was not tested in court as the claim was settled by negotiation/mediation shortly before the hearing was set to commence.

Acknowledgements:

Sales data RPData.com