COPY.
17
Honourable Director of Public Works.
So far as I can see I am only expected to comment on paragraph 14 of the enclosure forwarded with the Secretary of the Chamber of Commerce's letter dated 17th Sep- tember, 1940.
The basic principles of property valuation are not fundamentally different whether the property be free- hold, or leasehold in either instance the net income produced by the property is multiplied by a figure called the "Years Purchase" to arrive at the present value or capitalised value of the property. The years purchase figure is obtained from Valuation Tables.
In the case of freehold property however, such income is receivable in perpetuity whereas in leasehold property the income ceases at the expiration of the lease term, and in the latter case a lessee should therefore set aside a xx portion of the income for the creation of a sinking fund which will by the end of his lease have amounted to the capital he has expended.
2.
In England where much property is freehold it is found that such is in greater demand than leasehold prop- erty, except in districts where the greater part of the property is leasehold. As a result it is customary to value freehold property at a rather higher years purchase than leasehold prop- erty.
In this Colony where all land is held of
the Crown such comparison cannot be noted.
3.
In considering the valuation of leases for 999 years, 99 years, 75 years (non-renewable) and 75 years (renewable for a further term), it should be noted that a lease for a term of 999 years is to all intents and purposes the equivalent of a freehold estate. In view of the statement made in para. 2 hereof it might therefore be expected that such leases should be valued at a rather higher years purchase than a lease for say 99 years this practice however has not been carried out owing to the fact that in the open market higher prices do not appear to have been realised for property held on 999 years compared to prices paid for shorter length leases.
The years purchase figures from the 75 Valuation Tables for the above mentioned leases having a full term to run are as under:-
(a) 999 years (taken as for perpetuity)
14.286
(b)
.99 years
14.268
(c)
75 years (non-renewable)
14.196
(a)
75 years (renewable for a further term
of 75 years)
14.286
4.
The following schedule of comparative years purchase figures for varying lengths of a lease for say 75
Page 20Page 21
No comments yet.
Private notes are available after approval.