Retailers begin to look on bright side

Press, 22 August 1978, Page 1

Retailers begin to look on bright side

One of the grimmest effects of the recession has been the increase in the number of applications by mortgagees to force the sale of properties where the mortgagors cannot keep up the repayments. Last year such applications were running at the rate Of 6.5 a month in Christchurch, and resulted in 35 forced sales. This year to August 14, there have been 53 applications — a slightly higher rate — and there have been 17 forced sales, with others pending. Bankruptcies have not increased, but the Official Assignee’s office reports a big rise in the number of petitions to have people declared bankrupt. “It is an increasing means of getting debts paid,” said Mr Lvn Saunders, a deputy Official Assignee, “but most are settled before it gets to us.” In recent years Christchurch bankruptcies have been running about 55 a vear, with an average of 11 cmirt-ordered company windings-up. It had been surprisingly quiet in recent weeks, said Mr Saunders — only four bankruntcies last month and one company ordered to be wound up.

Since Christmas there has been a marked increase in the number of auction sales of manufacturing plant and equipment. Mr C. D. Smith, of Smiths City Market, puts it down to low spirits. “I think it has got to the stage,” he said, "where many people have just become disenchanted with the whole scene. They have tried to weather the storm, hoping that things would get better, but they have lost heart, especially in the building trade.”

Shops in Christchurch ■have had a bad time, but there are signs that things are improving. Whereas retail turnover in the Christchurch area was the worst in he country (down 3.8 per cent) in the last quarter of last year, it improved by 6.5 per cent in the first quarter of this year.

Stores that se” colour television sets have had an exceptionally good trading period lately because of the extraordinary demand.

The demand for "whiteware,” had been strong too said one department store manager. “We’re concerned that we will not have enough refrigeration for the summer. I con-

fidently predict a good period up to Christmas. We’ve had a tough year, but we’re looking on the bright side.” Another department store manager reported no dramatic upturn in general merchandise sales. Costs were a very real problem — any sales bouyancy was eaten up by higher wages, rates and electricity charges. However, the position varies according to the type of shop. Those in the home appliance and television trade cannot keep up with demand because of the big run-down that has taken place at the manufacturing end. The garment side is up and down, according to Mr F. N. Baddeley, president of the Canterbury Retailers’ Association. “There are no strong indications of increased sales. Then again, shops catering for the young people with no strong financial commitments, are trading reasonably well. There are still a lot of young unmarrieds getting good wages, and young marrieds who are both working — many of them have plenty to spend.” Department stores were seeing “a little glimmer”

of light, said Mr Baddeley, but would not get a real fillip until the Government’s budgetary measures began to take effect. He said retailers were hoping for a better flow of money once the tax relief measures became effective. “And if we don’t get increases in the next six months,” he said, “the retail trade is in for a hard time, and it goes right down the line to the

manufacturers’ door. Staff lay-offs are the net result.” He suspects that it might be Government policy to force some shops out of business. There were a lot more empty shops especially in the suburbs, and some businesses were only just hanging on. “The less efficient must be forced out,” said Mr Baddeley. "This is not a good. thing, because a lot of them are providing a service that is necessary.” But for every shop that closes, there seems to be another waiting to take its place. A shopping mall of

about 40 shops is being built in Cashel Street next door to Mr Baddeley’s shop. “Everyone seems to think he can become a millionaire just by opening a shop and getting into retailing,” he said. “There are going to be a lot of saddened and disappointed people.” Stringent price control at the retail level was making it difficult, said

Mr Baddeley. “The only way we can survive is by increasing sales.” But how to do that when more and more customers are finding themselves on the dole? “The retail trade is suffering more in Canterbury because of the high level of unemployment here” said Mr Baddeley. “I believe we should get help.” “I would like to think that things have reached the bottom,” he said. “I think they have. There’s a fair bit of money being chanelled into people’s pockets, and a fair bit of it should go into retail. It has to, to help the coun-

try. Then the manufacturer puts on more staff, orders more materials and machinery and things get going. “I often wonder if Governments realise the full implications of what happens when retail sales start to drop — it channels through the whole system.” Mr Baddeley is cautiously optimistic about the trend in retail sales. He says he hopes the glimmer of light at the end of the tunnel is not just Mr Muldoon with a torch looking for the way out — “I hope he’s got a bloody great beacon,” he said. Real estate is having a quiet time. Prices have dropped a bit and there is plenty of loan money about, but people are reluctant to borrow at the prevailing high interest rates. One property _ valuer says things have firmed in the last two or three weeks. Fewer houses have come on to the market, making a scarcity of good listings. But the prospects for owners of good houses are good. “They’re sitting on gold,” the valuer said, “because it costs so much

more to produce a good house with material prices going up.

“As soon as people start getting money in their pockets again, good sec-ond-hand properties must increase in price. I have never seen the gap between cost and value so great — there are some tremendous bargains around.”

A land agent said property owners were reluctant' to sell at the moment. There were relatively few houses on the market at realistic saleable prices. Properties between $20,000 and $45,000 were scarce.

The sluggish market has put a lot of land agents out of business. “It’s cleared the profession out of the so-called fly-by-nighters,” said one leading agent. Christchurch builders have been hit especially hard by the recession. The only thing keeping a lot of Christchurch builders going today is such small work as home improvements and repairs.

But Mr W. J McFarlane, president of the Master Builders’ Association said some of the bigger home builders were now starting to get “very firm

inquiries” for new homes thanks to the Government’s moves on home finance. Mr McFarlane has no doubt that the new “low-start” loans will help too, but their effect will not be felt for several months. In the meantime the big building companies face their most testing time. Architects are bringing forward a record low level of work, and several of the biggest firms have sacked a lot of men. Christchurch Homes has folded, and Paynter and Hamilton is being kept afloat by its creditors. Mr McFarlane blames the “stop-go” policies which produced the building boom of a few years ago, when everyone who could raise the money put it into housing. .The one good thing he sees in the industry’s present plight is that it has got rid of the fly-by-nighters, including solicitors and accountants, who commissioned housing during the boom and took the cream of the business.

These “spec” builders created housing where there was no demand for it, and caused a glut which continues to this day.

Tins is the last of three articles by GARRY ARTHUR on Canterbury’s economic problems.