Australian Valuation Office shut to help or hinder bubbles?
Today is a testing day for economic democracy with the announcement the Australian Valuation Office will be closed. The office has for 104 years valued our land – and was the cornerstone of the first federal tax office – the Federal Land Tax Office.
We show concern at this development because this austerity manoeuvre could spread to state government valuation officers.
Additionally, in the week the federal government announces a welfare review, the removal of this federal capacity places one more hurdle in the road to utilising economic rents for the common good. Whilst the AVO has been wound back to investigations of asset-rich, income-poor welfare receivers, the immense knowledgebase that will be lost is concerning. With only $6 billion in New Start payments per annum, it seems that this welfare review will be a PR stunt rather than significantly addressing our upcoming deficit. Whilst Tony Abbott was willing to cycle for disability reform in the election campaigning phase, he now has his eyes on disability welfare, worth over $30 billion p.a.
A far more useful investigation of welfare flows would be to look at the $340 billion in unearned income handed to monopolists each and every year. Those privileged to own such assets earn more for less work and are barely taxed by the federal government. The Total Resource Rents of Australia report outlines how we could use these considerable economic rents to finance government. By switching taxes off labour and capital and placing them natural monopolies, Australia would soon enjoy an export advantage.
However, the government seems to prefer taxing our health and essential foods, rather than engaging in meaningful tax reform to address the real welfare recipients.
The use of private appraisers by the US banking system hints at the concerns we raise. Whilst dozens of books have been written about causes to the global financial crisis, just a few sentences written back in the year 2000 were a sufficient warning, as Randy Wray quotes:
We, the undersigned, represent a large number of licensed and certified real estate appraisers in the United States, who seek your assistance in solving a problem facing us on a daily basis. Lenders (meaning any and all of the following: banks, savings and loans, mortgage brokers, credit unions and loan officers in general; not to mention real estate agents) have individuals within their ranks, who, as a normal course of business, apply pressure on appraisers to hit or exceed a predetermined value.
This pressure comes in many forms and includes the following:
- the withholding of business if we refuse to inflate values,
- the withholding of business if we refuse to guarantee a predetermined value,
- the withholding of business if we refuse to ignore deficiencies in the property,
- refusing to pay for an appraisal that does not give them what they want,
- black listing honest appraisers in order to use “rubber stamp” appraisers, etc.
The above is part of an actual petition launched by US property appraisers, concerned about the blacklisting of property valuers who were willing to give a realistic land valuation. Property appraisers who embellished property values added a bubble-like atmosphere to land prices and were thus employed by the financial system. Companies such as Goldman Sachs were prominent in compiling such a blacklist. This downgraded the checks and balances upon land valuations, assisting the only way is up ‘phenomenon’.
If as the Abbott government states, the digitisation of valuation is possible, careful development is essential. Digital software such as Google Earth should only be permitted to replace public valuations with appropriate checks and balances. One such check could be a public valuation map, similar to a topographical heat map that anyone in the community can look at online (or on community noticeboards) to compare the valuation of neighbouring properties. This provides economic transparency to ensure prices are relative to the local market. Discrepancies would be the grounds for the standard valuation appeal.
A tab could be clicked to reveal the land valuation divided by the median income for that local community. If the valuations are out of sync with the capacity of local income earners, prospective buyers would see a bubble-like warning via a red heat topographical map.
Bi-annual land valuations could also be a thing of the past. Quarterly valuations via software could well update property valuations when the announcement of a new train line, new school redevelopment, road works or increased densities affect surrounding property valuations.
We will keep a close eye on these developments and hope this trend does not filter through to state government valuation offices where the majority of land valuations still occur. Rumours are that the Victorian VG’s office has already endured significant cutbacks. The AVO closure increases the importance of the Valuer General’s office and their ability to balance market sensationalism with the reality of the community’s earning potential.
Additional writings on the topic:
Bryan Kavanagh, a valuer who worked at the AVO for 18 years, has two posts on the importance of this vital public service.