Sessional_Paper_1938 — Page 114

<

110

6. Evidence which really puts the matter beyond doubt and disposes of the necessity for a long inquiry into particular cases, was given by a representative of a European bank. He told us that his experience during the last six years had convinced him that the position of house owners had been growing worse all the time- their revenue has gone". The bank had advanced money to many such owners. Valuations of property were arrived at by ascertaining the revenue derived from rents and calculating the capital sum on which such revenue would represent a return of 8%. This standard of calculation was not rigidly adhered to, but represents the broad basis of valuation. The usual advance was limited to 60% of the valuation, and interest was charged at 5%. The witness told us that in a great many cases during the depressed years landlords had not been able to obtain sufficient to pay the 5% interest on 60% of the valuation. At the end of 1937 he had reviewed several hundred mortgages. The values of the properties, based on the rent returns at that time, barely covered the advance, whereas a few years previously the advance had only represented 60% of what the witness regarded as the real value of the properties.

7. The evidence referred to in the three preceding paragraphs is authorita- tive, but in all cases landlords have stated, and we believe them, that they have sustained a drop in income, in most cases very severe, while in many cases they have not been able to pay the interest on loans which they have been compelled to obtain from the banks in order to carry on at all.

8. It has been suggested that in assessing a fair return on capital outlay, regard should be had to the conditions, obtaining at the time when the expenditure was incurred. That is to say that if property is acquired at the peak of a boom period when property values are unusually high, it would be unreasonable in a landlord to expect a steady return of 7% on his abnormal expenditure. But the problem is essentially one of supply and demand, and the investor in house property who comes in on the crest of a wave, will inevitably suffer when the wave recedes. It seems a strong thing to say that when demand revives, the investor shall be debarred from endeavouring to reimburse himself merely because his original investment was unduly optimistic. Be that as it may, we are satisfied that the majority of landlords are at present persons who built or acquired property as a permanent investment. The speculative builder who hoped to reap a quick profit on a rising market has either defaulted altogether, or been replaced by concerns which advanced him money limited to a percentage of valuations made in the ordinary course of business and which have thus become, to adopt an apt phrase used before us, "unwilling land- lords". The property market in this Colony, for many years at least, has always displayed short spells of activity followed by long intervals of slackness. It is not to be expected that investors will build only in the slack periods at a low cost, when returns must be small, on the chance of an early revival. It is only on the signs of revival that persons will begin to purchase and build house property and in the process the standard of necessary expenditure inevitably rises, but if investors did not incur this higher expenditure, it is obvious that periods of activity would disappear and development be permanently arrested. It should be added that there is at present little or no evidence of an increased market for Crown Land or private house property. There is only a general upward tendency in rents.

PART IV.

Evictions and Alternative Accommodation.

1. The Government Assessor of Rates provided us with a table compiled from his records showing the number of tenements vacant monthly in the Colony from January, 1935, up to the end of February, 1938. A copy of this table is annexed to this Report as Appendix I. In July, 1936, the number of houses and floors standing