LAND VALUES.

Auckland Star, Volume LXV, Issue 238, 8 October 1934, Page 11

LAND VALUES.

PRODUCTION BASIS

UNIFORM METHOD NEEDED.

MARKET LEVEL TOO HIGH.

Proposals for a, sounder method of land valuation arc contained in a bulletin prepared by the Canterbury Agricultural Collrge and issued by the Canterbury Chamber of Commerce. According to tfhc bulletin, the Government capital valuations are not a. satisfactory guide. ! They are based on the market value of laud, and market prices have tended to-' be above the producing value. Tliey tuivc been accepted as a criterion in tlje buying and selling of land and as a, ! basis for farm advances and for borrowings on mortgage. Further, the valuation; of all similar farm land tends to be /based 011 the prices that have been paid for land. Farms that arc conservatively capitalised and well managed teuid to be penalised by high Government -valuations in so far as land tax and csttatc duties arc concerned. Moreover, valuations as. between districts whic'4. are based on recorded market values, at varying times arc not | uniform and are often inequitable. ' Some method is needed by which basic values co'flld be fixed, constantly maintained up to date, and placed 011 a uniform fcvel throughout New Zealand with very little recurring cost. If a suitable method were adopted as the basis on. which valuations were made, then laijd owners, investors, banks and stock a,Tid station agents would know the tru<9 value of the land. Gambling in land would be less common, confidence would be restored, and farming would be mare stable. I

Classifying of Lands. Thci bulletin states that tlie producing value of any particular farm depends upon the normal net returns that can be obtained from that type of farm. Theocretically the market value of farm land, generally should coincide with the cm pi a Used value of the estimated future production therefrom. Jf a logical and uniOorm method of valuation were to be established the estimated normal producing value must form the basis of such valuation. In order to arrive at a valuation it would be necessary to atjopt some system of classification of laaids. The classification would be first on a Itroad basis, largely dependent upon whether the land was principally suited Cor sheep farming, dairying, or cropping. A further more definite and specific sub-classification would then be neces- ! sary. pairying and cropping land could be classified into groups according to carrying capacity, type of crop grown and yielding capacity. Tt would bo found "that although individual methods of management, carrying capacity and production varied from farm to farm, the actual main grades of land could be fairly readily and definitely classified by any individual farmer or valuer. At present the Government valuers decided as t.o what land might be placed in particular grades, and such decisions could be made more authoritative and accurate as definite data were built up by surveys based upon soil, plant cover, farm type, etc. Tn each main grade of land, the estimated normal earning values could be determined by a consideration of the returns of representative farms of that grade. Based on these results earning values per acre per sheep or per cow carried could be calculated and the earning value of other land of a similar grade directly estimated on the basis of its acreage and carrying capacity. Asa preliminary to actual publication of results for the various grades of land the foundation data on which these results were based required assembling.

Producing Capacity. Records of average carrying capacity and production, the bulletin points out, are collected in the annual statistical returns, and could he used to determine tho average returns that have been obtained from farm land. Statistical averages of production and yields per acre by counties, even though available, arc of little use because of the various grades of land within one county. In some cases individual farm returns aro available. For example, the sheep returns allow of determination of average sheep carrying capacities for most properties. Further information as to average production could be obtained from the statistical records or from representative farm accounts, but abnormal results must be ignored. Averaging Returns. On the basis of experience and local knowledge, normal farm expenditure for representative farms in that grade can be approximately determined. The net return, that is, the difference between normal farm income and normal farm expenditure, is then obtainable. On the basis of such a return, producing values for land of similar grade can be readily determined. The normal farm income can be checked by making use of statistical data already available and multiplying average production by average prices. The normal farm expenditure can be checked by setting out the individual items of cost for all known expenditures. Producing values having once been determined for representative farms, adjustments can be made for differences in various factors. These adjustments would be based on the estimated effect on net income of such factors as situation, climate, water supply, changes in prices for products sold, general improvements in methods of production, The valuation of the representative farms is calculated on the basis of a farm fully equipped with necessary improvements at tiic time. Additions to or subtractions from tho basic per acre earning value would require to be made to allow for the presence or absence of certain buildings and other improvements for location or residential value where this factor has not been considered in the price.