Insurance Leasehold Plan Revised

Press, Volume C, Issue 29502, 2 May 1961, Page 16

Insurance Leasehold Plan Revised

(N.Z. Press Association) WELLINGTON, May 1. An important change In lending policy was announced by the Minister of Housing (Mr Rae) in Wellington today. The acceptance by the State Advances Corporation of sections under the insurance leasehold scheme has been revised and the ban placed on nonbuilder subdividers in November last has been eased, while annrova! to builder subdividers will in future be granted up to a fixed percentage of the eligible sections offered.

The insurance leasehold scheme was introduced in 1957 to assist home-seekers with limited capital to acquire building sections and erect homes. A lease is granted to the home-seeker with the option to purchase. When the house is nearing completion, an insurance company purchases the land and becomes the lessor. It was designed to augment the supply of sections and since its inception it has gained great impetus, particularly in the Auckland province and to a lesser extent in other parts of New Zealand. A high percentage of loan applicants today are using the insurance leasehold scheme, which enabled people to acquire new homes with virtually no capital outlay. “Tax Resources" "While the Government desires to see home ownership placed within the reach of as many as possible, the scheme has taxed the financial resources of the State Advances Corporation,” the Minister said. “It does provide a quick and easy means of disposing of sections with obvious benefits to subdividers and builders, but it has greatly increased competition for land, which must increase the price of sections. “The scheme has made a valuable contribution to the supply of serviced sections and many small builders have relied on development companies to supply their section needs.

“Against this has to be balanced an over-stimulated demand for finance, inflated

land values and in certain cases undesirable practices that have crept in,” Mr Rae said. Decisions “The government has made a comprehensive review of the scheme and the following decisions will apply in future.— “The ban on non-builder subdividers has been lifted and the State Advances Corporation will accept up to 40 per cent, of elegible sections in any subdivision undertaken by such companies. "For builders developing their own land, 60 per cent, of the eligible sections will be accepted and where the developer is also a builder and is developing Crown land 'and building on these sections, up to 70 per cent, of suitable sections will be accepted. Arrangements of this type exist at Otara. “The balance of the sections in each category will have to be sold freehold.” "Uncertainty”

That decision would relieve the uncertainty which had arisen since the restriction on non-builder subdividers was imposed by the previous administration last year, said the Minister. All existing arrangements would be honoured and applications in

abeyance would now be reexamined. “The State Advances Corporation is the only lending institution lending on insurance leasehold sections, subject to certain conditions. The price of sections must be related to value and must not exceed £750 in any case. “An insurance policy is sometimes taken out by the purchaser as part of the leasing arrangement to cover repayment of the balance of the purchase price of the section. However, conditions of the scheme provide that insurance companies should not require purchasers to take life insurance policies as a collateral security. This condition is reaffirmed. "It has never been intended,” said Mr Rae, “that the insurance leasehold scheme should replace the development of Crown land. Its place is supplementary. The Ministry of Works will continue to develop land- and produce sections for housing purposes.

“It is a fundamental point of National Party policy that Crown sections in Government subdivisions, surplus to the needs of the Housing Division, will be sold to the public and this has already been done in several cities and towns," said the Minister.