The Evening Post WELLINGTON, THURSDAY, JULY 26, 1945.

Evening Post, Volume CXL, Issue 22, 26 July 1945, Page 6

The Evening Post WELLINGTON, THURSDAY, JULY 26, 1945.

HOUSE VALUES ON' SAND

The supposed rock foundation of stabilisation has proved less solid than it was proclaimed to be. This is not altogether surprising. The stability policy was brought into operation late, when disturbing stresses had already developed. It was hoped that there would be a gradual easing of strain by adjustment here and there and that the foundation would yet retain its strength. The stresses have been great and the adjustments, especially those made within the last six months, have been substantial. Their full effect has still to be disclosed. We refer particularly to the more recent wage increases which have given the wage-raising the appearance of a flat increase, whereas the intention was that it should apply only to those groups of workers who had been left behind and were receiving less, in proportion to their skill, than other groups that had got ahead in the race. But wage increases are not the only threat to stability or the sole cause of weakness in the stability structure. All labour charges ultimately come to be expressed in costs, prices, and values. With, consumption goods, the labour cost finally must take the form of a price increase, though control or subsidies may delay or screen the process. How this is to be worked out is not fully disclosed, nor are the full effects yet visible or calculable. A particularly difficult problem is presented by one class of capital-consumption goods, dwellings, which cannot be insulated from inflationary shocks, and' yet, for the maintenance of the stabilisation scheme, should have a stable value.

What is the present position of house values? Under the Servicemen's Settlement and Land Sales Act they are supposed to be fixed at the values ruling on December 15, 1942, with consideration for "any increase or reduction" since that date "in the value of the improvements on the land." No Land Sales Committee or other authority has, so far as we know, announced a change in the basis. We are entitled to assume, therefore, that this is still the measure used in assessing values. But how can this possibly apply to a house constructed with labour and materials all loaded with the recent increases? We cannot assess the amount of the increase, but, when all the added costs have come to charge—that is, when timber, fittings, and appointments all bear the higher labour charges—the addition will be substantial. The owner of such a property cannot, of course, be called on to accept a sale price based on 1942 costs. He may be told that he can recover the cost, less depreciation. That is to say, the rather vague and wide formula for determining values, particularly the "increase or reduction" phrase, may be. interpreted as authorising the Land Sales Committees and the Court to allow for the higher cost ■of a house built now as compared with an exactly similar house built in' 1942. But. then what a mix-up there will be. The 1942 house will have one sale price, the 1946 house one much higher, (apart from the calculable depreciation difference). The older house, will acquire something ,of the reputation of a vintage wine (prestabilisation vintage). And 'if the "increase or reduction" phrase is held to permit a flat increase for both old and new, houses, what compensation can be given to owners who have sold on the 1942 basis? Are they to be told: "We said the value was fixed, and we thought it was, but it wasn't, and if you sold at what we said you must accept; that's your bad luck"?.

The problem cannot be lightly brushed aside. Dwellings are the repository of the savings of thousands of thrifty people, and injustice to these people cannot be excused. It is injustice to force them to accept, if circumstances lead them to sell, a price which is not in accord with real market values as such values are expressed in the cost of other goods and services. The loss to the seller and the gain to the buyer cannot be treated as the sole concern of the parties to a transaction —as something that ,is likely to accrue in any dealings in real estate. These people are not in the main "speculators." Few of them would risk a gamble in what they have acquired by great thrift and with difficulty. The Legislature has stepped in and, having stepped in, it cannot say to the house owner: "Well, you want to sell, and it's your risk." Having intervened, the Legislature must see that justice is done —full justice. Moreover, the Government must accept the full onus of its claim and aim to stabilise property values. As conditions are now, the foundation for values is anything but certain and stable. It is like the foundation of the house built on sand, subject to shifting with every wind and (storm. Sand is not a good foundation; it is not even good cover in which an ostrich-like stabilising' Government may hide its head and refuse to see the danger that is threatening.