LAND VALUATIONS.

Taranaki Daily News, 11 February 1922, Page 7

LAND VALUATIONS.

POSTWAR DIFFICULTIES. EFFECTS OF BOOM.

(By

E.J.S., N.S.W.,

Herald.)

in Auckland

No subject perhaps is interesting the financial branch of our lending institutions to-day so much as the market value of real estate—city, suburban, and rural —and in this respect New Zealand is not singular. The experts in the Old World, Australia, and, to an extent. South Africa, are equally perplexed. It may be postulated that land in its generic sense is the main asset of the balance-sheet of any country. Show me your broad acres, and I’ll forecast your future. This asset then of all others should not be fooled with, nor should wild-cat proposals for sale or settlement be tolerated oy tne people or the Government. More, harm can be done to any country or district by over capitalisation of land values in 12 months than 12 years can remedy.

In this respect, if my observation and inquiry goes for anything, New Zealand seems, bo far as farming land is concerned, to have run riot, and the pity of it is the legitimate investor suffers equally with the booster. The folly of imagining that butter, wheat, and wool would maintain the 1918-19 prices, and of basing the values of land on its productivity on those figures, is a commonplace, and needs no amplification. But this alone is not the cause of the recent inflation. In common with otuer places, in our anxiety to redeem our promises, both given and implied to those brave fellows who risked so much for the flag, we have made the mistake of supposing that an indifferent good bootmaker, or capable watchmaker, should make a successful farmer. To my mind this is the initial and main error.

Months, aye, years, in some cases, of open-air life, heart to heart talks between the artisan and the rustic, in the trenches, have given a glamor to country life. City youths, and grown men, too, for that matter, finding upon returning from the front, their billets gone, or comrades placed over their heads, clamored to go on the land. True,, the life is ideal, but only ideal to those brought up to it. Far better to have given or advanced these men double the money spent on farms, and given them a start in a vocation they were temperamentally and physically equipped for. However, New Zealand has not erred alone in this, but at least it should not be further perpetuated, and it is this practice that has contributed to the inflation of prices, and will accentuate the fall.

RIOT OF PRICES. Now, as to the remedy. One phase that has to be attacked is the plurality of mortgages over the one farm or residence. In far too many instances in the Dominion, a, great number of liens or mortgages represent the gambling balance between the real value and the sale price, existent purely upon paper, as between perhaps half-a-dozen gamblers in real estate, none of whom could ever find even 20 per cent, of the corpus. The modus operand! is as follows: A sells a. farm to B for £3OOO, terms one-third cash, balance £2OOO on mortgage—a legitimate sale. A few days or months after B is tempted by an offer from C of £3500, of which £250 is paid in cash and one second mortgage of £250. C sells to D for £4OOO, again £250 cash and third mortgage of £250. A land agent induces D to sell to E for £4500, perhaps £2OO cash, and £3OO on fourth mortgage, and E to F for £4750, for £lOO cash and £l5O on fifth mortgage. The price has been raised from £3OOO, a fair value, to £4750 by gamblers, none of whom intend to seriously work the farm.

Verily Pelion on Ossa piled. But what is the result when C finds he cannot meet the interest due on the first mortgage? Tn many cases each intermediary must lose his quota. This state of things is bad. The public should not be encouraged to embark upon this class of speculation, nor should-they get Government protection. The last purchaser may have been bona fide, but foolish, and unless he can find the cash to pay off the intermediate encumbrances must lose his stake. It is these sales, too, that often provide the basis for other dupes. In normal times comparable sales of similar lands should evidence ruling market values, but transactions of the character cited should be absolutely discarded. DEAR LAND AND DEAR MONEY. Both here at the Antipodes and in the Old Country the present situation in the movement of land values is difficult to understand, and presents novel features. The price, not necessarily the value of all forms of real estate, has risen with the rate of interest or mortgage money. Economically the converse might have been expected. Cheap money should spell dear land. Tn all previous booms in Australia, at the period when land formed the leading form of speculation, money was cheapest, and as the financial market became tighter and mortgage interest rose, so prices declined—a natural corollary as it seems to me. But curious to relate, during the last decade, notwithstanding that interest has risen quite 50 per cent, over that obtaining eight to ten years since, almost all forms of real estate, city and country, have increased in price by leaps and bounds. One can understand that with the mci eased cost of labor and material of all sorts, buildings and improvements generally are far more costly and consequently sell for more money, but why has land too soared up? 1 incline to the view that for a long period to come prices reigning for building material pre-war, will not recur unless we have some financial panic of which I am optimistic enough to see no portent, but I also incline to the view that under duress, through house shortage, many purchasers have been forced to buy at prices beyond which prudence would have dictated as fair value. The whore situation is unprecedented and novel, and no basis exists for a definite determination of the eventual results of the present abnormal prices, and reduced hours and higher pay for all classes of labor, both clerical and artisan.

Our whole viewpoint has changed. Where a decade ago many of us did not feel justified in buying a pony and sulky, th e same man is not contented with a Ford, but actually sports a Hudson super six. Imagine 10 years ago a Prime Minister having the temerity to even talk of raising local loans of tens of millions of pounds' “Tempora mutanter, et nos mutamur in illis,” and so you face the future confident in your wonderful resources and your ability to not only maintain but improve your position.

This is my third visit to your country, separated by 10-year stages, but 1 am the more impressed each time by

the evidence of progress, in your farming pursuits—your hack-bone —though I admit a feeling of amazement that you have out-Heroded Tierod in the speculative mania in rural lands. Regrettable as the insane gambling in some districts has been, and there is no otner word for it, the fortitude with which the public seem to face the music is more than encouraging, and augurs well for Mr. Beauchamp’s view expressed the other day that -in nite of the heavy burden and mistakes, you will “win through.”