Why Development WA sold a parcel of regional land for $415k less than its value

The state’s finance watchdog has accused land developer Development WA of putting commercial interests and expediency before transparency and accountability.

Auditor-General Caroline Spencer released the findings of a lengthy probe into Development WA on Wednesday, revealing significant issues around land sales, including missing documents and poor management of conflicts of interest.

Development WA sold regional industrial land for much lower than it was valued at.Credit: Domain

“Taken together, the rigour, consistency and curiosity that was absent means Development WA was not, between 2017 and 2022, conducting land sales in a way that minimised the risk of error, fraud and corruption, and is unable to demonstrate that probity and value for money was achieved,” Spencer said in the report.

Spencer looked at thousands of land sales from July 1, 2017, to June 30, 2022 and found several instances of sales made without available rationale.

Block sells for half-price

Among those was the sale of a piece of regional industrial land for less than 50 per cent of its valuation price in 2022.

Spencer found the piece of land was originally approved to be sold at $600,000, but was dropped to $450,000 in 2020 under a COVID stimulus scheme known as the Temporary Incentivising Regional Land Pricing Policy.

In July 2021, Development WA had the land valued, and it was determined to be worth $800,000, but it continued to be marketed at $450,000 and eventually sold in April 2022 for $385,000.

“When we queried why the land was advertised and sold well below the valuation, Development WA advised the valuation was incorrect,” Spencer said.

“Having reviewed the valuation, we do not agree with Development WA’s reasons for it being incorrect as it reflected the condition of the land.

“No record has been provided explaining why, at the time, it was seen to be incorrect, or why a replacement valuation was not requested.”

Spencer said after further questioning, Development WA justified the lower sale price, saying it reflected the latest available land tax determination from the Valuer General of WA.

She said this was not an approved basis for valuing the land.

‘Valuation shopping’

Spencer found another regional industrial property sold for about $350,000 less than a valuation suggested because another valuation sought by Development WA suggested the lower price.

Under Development WA’s valuation policy, it must seek a third valuation, or valuers must agree to a price when values differ by more than 10 per cent.

Spencer said that by unnecessarily requesting two valuations, Development WA “arguably engaged in valuation shopping, with a view to using the lower valuation received”.

She said Development WA told her that under the COVID stimulus policies, it was allowed to suspend normal pricing policies.

Spencer found no mention of this in documents relating to the sale.

She found nearly half of the pricing of 1100 properties for sale by Development WA under this COVID stimulus policy did not comply with approved pricing methods because they either lacked a valuation or their pricing calculations were incorrect.

Spencer also raised serious concerns with Development WA’s management of conflict of interest and gifts and hospitality registers.

“Without sufficient or complete details in the register, it is not possible for Development WA to easily demonstrate that conflicts and relationships are managed in an acceptable manner,” she said.

‘No fraud’

In its response to the report, Development WA said Spencer’s probe covered a period of unprecedented and significant events, including COVID-19 and associated stimulus measures, when it sold 3196 lots across the state.

The agency said no actual fraud, misconduct or corruption was found during the audit.

It also defended the sales of the parcels of regional industrial land identified by Spencer.

“Regional industrial markets are shallow and thinly traded, with very high costs of construction, highly cyclical economic conditions and highly variable revenues. As a result, these projects often require stimulus measures to promote activity,” it said.

“Illustrating this, two of the three transactions related to land that had been on the market for in excess of five years.”

Spencer noted that the agency’s culture had started to change in recent years and the agency conceded there was room for improvement.

Opposition planning spokesman Neil Thomson said Spencer’s report was damning.

“The report shows nearly 50 per cent of repriced properties breached policy guidelines – this isn’t sloppiness, it’s systemic failure,” he said.

“When conflicts of interest and gift declarations go unrecorded, it’s not just a paperwork problem – it’s a governance crisis.”

Planning Minister John Carey also noted the cultural change at Development WA and that it had implemented a number of Spencer’s recommendations.

“Development WA delivers a number of projects in areas of the state where there is market failure or where there is additional government objectives, for example, the provision of social and affordable housing,” he said.

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