FINANCE FOR HOUSING.

Auckland Star, Volume LIX, Issue 225, 22 September 1928, Page 4

FINANCE FOR HOUSING.

(Published by Arrangement)

AUCKLAND ENTERPRISE.

BT7XLI>IXG AND INVESTMENT.

PUBLIC ISSUE OF SHARES.

Practical experience has proved that the most reliable solution of the financial problems that confront the home-seeker is the table-mortgage.

Its principles have been successfully applied for many years, by States, municipalities and co-operative societies, and since the war, in this and other countries, the system has been one of the greatest factors in the provision of housing on a larger scale than had ever: previously been attempted in a similar period. The table-mortgage, under which the home is redeemed from debt by the owner-occupier, by means of regular instalments of principal, increasing as tho interest charge of the unpaid portion declines, within a fixed period of years, meets the needs of the thrifty home-maker by reducing the cost of purchase to little more than the rental of tenancy alone. It is an admirable form of investment for capital, as the loans are not only based on sound security from the outset, but that security is also steadily enhanced as repayments are made by the borrower. Such investments probably cannot be made directly by the individual investor, as their success depends upon the continuous re-employment of the repayment instalments. Capital mobilised, as in a limited liability company, working under expert guidance on sound principles, can, however, be both safely and profitably employed under this system. Demand for Housing Loans. It is scarcely necessary to quote evidence of the popularity of this method of finance for home-building. The operations of the co-operative building societies, which a specialised adaptation of the amortisation principle, have steadily expended throughout theip history, and loans offered by them for purchase command premiums that indicate both the attractiveness of the system and the eagerness to secure its advantages. Economy and Security. The advantages of this system to the home-seeker of modest means are manifest. The alternative is to arrange for the financing of his home-building by ordinary short-term mortgages. Even if he has a clear title to his section, he will, in most cases, have to raise two mortgages, and as the second is usually discounted, the cost of the house is greatly inflated by the associated charges. The heavy initial expenses are multiplied by successive renewals, while anxiety regarding his ability to renew the mortgages, as they periodically fall due, becomes a vexatious addition to obligations already sufficiently onerous. No doubt, many have successfully surmounted these difficulties, but while they remain, they seriously discount the ostensible security of tenure, which is the fundamental objective of the home-builder. These disadvantages are avoided by the long term table-mortgage. Recognised authorities are agreed that there is now a large amount of capital in New Zealand seeking sound investments, and with a view to enabling some of this capital to obtain profitable and secure employment, a company is being formed in Auckland to carry on finance and building operations that will contribute to the satisfaction of the constant demand for housing finance. The essential features of its policy are that it will advance money, on first mortgage only, to erect houses for approved applicants, the company itself purchasing the materials and supervising the construction, while the borrower will repay the loan by fortnightly instalments in 17J years— an arrangement that will obviously be more popular than the half-yearly instalments for thirty years under the State Advances scheme. Strong Board of Directors. The prospectus of the company —The Building and Investment Company (Auckland), Limited—has just been filed. The provisional directors are:— Mr. J. A. C. Allum, the well-known electrical engineer; Mr. M. J. Jones, a retired architect, who has had an extensive practice in Taranaki; Mr. J. W. Hayden, for many years managing director of a large and successful business in New Plymouth, and well known as chairman of the Waitemata Electric Power Board; Mr. R Parker Hill, who has had considerable experience in the building, and real estate business of suburban Auckland; and Mr. H. Purser, who has been head of a well-known firm in Wanganui, which bears his name. These are five successful business men, whose experience in commercial, financial and professional spheres ensures that the business of the company will be controlled by a directorate with intimate knowledge of its various aspects, and that the success of the undertaking may be confidently anticipated. The company has been fortunate in securing for a few years the services of Mr. J. W. Hayden as managing director. Its prospects have so strongly appealed to those already acquainted with the project that the directors and others have applied for nearly 4000 shares. It is seldom that shares in an investment company, offering a safe, almost giltedged security, combined with steady and reliable dividends, are offered for public subscription. The opportunitv now presented will therefore be of unusual interest to people who prefer, as against speculative enterprises, an investment in which their capital will -be safe and the income from it assured. Issue of 22,000 Shares. The nominal capital of the company is £60,000, divided into 30,000 preference shares and 30,000 ordinary shares, both of f 1 each. At present only 22,000 ordinary shares are offered for public subscription, payable bv easy instalments. The capital will be secured on first mortgages on houses to be erected for borrowers who have sufficient margin of security—in practice, unencumbered ownership of a building allotment—and are personally approved by the directors. The company will itself purchase all materials, calling tenders for supplies as required, and will entrust the erection to contractors, subject to the company's expert supervision, no labour being directly employed or stocks carried by the company itself. Hence the capital will be en«m<*ed wholly and solely in financing the°erection of homes for the most thrifty class of borrowers, and in every house the quality of the materials and the faithfulness of workmanship will be guaranteed to the company and its shareholders by their own oversight. From the outset the advances will be I represented by substantial value, free of speculators' proflta or other inflation.!

■I By this means not only will the initial security for the advance be enhanced, but the borrower will be enabled to obtain a home at less cost than by any other method, and his thrift will be encouraged by the provision for fortnightly payments. All discounts will accrue to the company, and will be reinvested in itg operations. Dividends will be paid out of the interest payable by borrowers and, as a result of the constant reinvestment of capital, this is expected, after the first year of operation, to yield sufficient for a dividend of 7 per cent, which should increase after four years, while the value of the shares will be increased by the sound policy of reinvesting other profits, to probably double their original cost in seven years. Copies of the prospectus and application forms may be obtained from Messrs. Frater Bros., Queen Street Auckland, any member of the Auckland Stock Exchange, or from the promoter Mr. J. W. Hayden, 211, Victoria Arcade (second floor), Queen Street, Auckland.