BOOM OR SLUMP?

Dominion, Volume 1, Issue 242, 6 July 1908, Page 7

BOOM OR SLUMP?

SECTIONS, HOUSES, AND TENANTS SUPPLY AND DEMAND, SOME ESTATE AGENTS' VIEWS. ...Real estate valuos, like marketable commodities, are subjcot to a commercial force —one may call it the business force'of gravity if ono likes—which, according to certain conditions; and circumstances," determines the limitations of •a. rise or fall-in prices. The real namo of this force is tho law of supply - and demand, and on the ratio of. the . supply to the demand depends the price. If the demand-'is a roasonablo one, i.0., if it represents the genuine necessities of the buyers, a. reasonable stability of the market may be expected.i But when people buy what they do not'actually want, with the purpqso. of-creating,a demand—a fictitious demandfictitious values aro the. result, and-we get what is commonly-oalled a Boom. Booms and Slumps. Booms are noted for theij- soaring propensities. A Boom, however, cannot go on soaring for over, for ■ the business force of gravity gets to work and pulls it down again. If the " pull" is riot too violent, the Boom may- gradually subside,, and may, perhaps, ■ remain stable at a reasonable altitude.' But sometimes a Boom comes down' suddenly and violently, and bursts; than it is called ■i Slump,.'and those who have not had.warning or time to ; get away from under are liable, to. be: hurt. From; which it will bo seon 'that Booms are dangerous things*-' A Query. As 'everyone knows, the values of re:/] ' estate in Wellington City and suburbs have, during the last few years, been climbing up. Landi and ■ houses are dear, and rents aro almosjt. prohibitive.. These aro the outward and;-visible i signs a demand, but; high values notwithstanding, one sees empty housps ■ and vacant ■ sections,- many of them; in; the suburbs.'. Why is this ?. '.' ; ■■'. f! •, Views of an Estate' Agent. , "The - fact; of - tho matter is ' said a 1 member of. a. well-known and old-established firm", of estate: agents; "there has been placed on the, market'enough real estate to supply the ' bona . fide requirements of 200,000 people." ; (The- population of : ' Wellington and suburbs ; ;.riiay be..' roughly - estimated at 64,000.) : "Peoplo have bought, not as bona' i fide; purchasers, but merely for the purposo of exchanging, at a profit;' This; has been going on for. some; considerable: time,. and. 'fictitious '.values have resulted.lf you . wish ,to:arrive at a comparison of speculative and iboha -.fide ' purchasers/ 'contrast the actual . population ,pf : any: suburb with the, actual ; number ,of its .ratepayers.) The figures will be significant.,. In : discussing tbe question l of. a fall in' values, the , actual demand, not the speculative demand, shouldv be ; taken as a ' , basis." If : a man buys what he". does not' -actually 1 wanj, and subsequently finds that ; lie canijot carry his liabilities,. he endeavours .to.' sell. •; If nobody wants'- to buy,: he : 'sell except ■ by offering a bargain, which is a loss to him. Then someone raises the cry of falling values." v .. :

Prophesied for Four.Years. , Another .-land ageilt said-that a slump in land values . had been prophesied for the . last four years, and financial institutions had prepared for it:: " People,have been on the alert," he said, "to . some extent, but it <has, not 'arrived yet,: arid I do not think it ; will arrive; Wool and other products being •down must^have; their effect,-!!but . I think -,t'hat Jwhen./the i,spring comes- things: .will be all', right, v 1 : canctellfy'ou -candidlyithat land has ifallon in eomo of . tho -outlying- suburbs, rhut,.with improved communication they should boablo.to hold their own;!'.. A Set-back. : .An'_estato agent in a largo way stated that certain suburbs had received a set-back, but ' difference of £1 per foot in the valuo was small compared with tho cost of building, for'a house that formerly cost £400 tq erect now costs'£sso. . He thought that tho banks would open out directly, nnd money would 'not'be so tight. ' As regards city properties, his firm.had, alargo.number of solid inquiries, and there' was not a great difference between buyer and seller; Values in tlio suburbs were troubling some of the speculators who purohased in anticipation of a rise, and now the banks -, were , asking for the money. 1 .. : Tho result was that some were prepared to sell at: a small loss. Compared with a few years back, the demand for suburban sections : is-not. a twentieth of . what , it was among speculators, who: all had the, idea that "everything in the garden, was lovely," r and that they . would make money later, on.. j The "later on" . had now come, and ' they found that, profits had mot come •up : to' exjpectations. Men in steady billet's were still buying for building purposesj -and this ;.;wasi-'a very, ;healthy v sign. , -Thsso investments,'as a'rule, were in non-spccal;itive. localities—localities where no rise in -value could possibly be expected. The agent did not think that values would come down ex'ccpt in a few cases, and there could bo no possible effect, on oity valuos. , . . City properties. r We- bave," said ono of the keenest cs- • tato agents in town, " something like 500 pooploon our books who will ' buy if wo call supply theta'with-what they want. They are bona fide'buyers. City properties? The demandfor City_ properties is as strong as • ever.' 'In my opinion,"' lie said, "you must have at hand land—accommodation —at least fifty years ahead of the-population. Look at Newtown 1 Fourteen years ago the Welleslay ' Block (in the vicinity of Mein 'and Constable Stroets) went, bogging at the'first sale. Two sections were afterwards sold at £2 10s..per foot., -Now'T can get : £IOO per foot for pro- ' perty, in that locality.". ; - . .;' ■ No Slump. " The speculators have been all over Mir-. . amar, Island Bay, Northland, Karori, Hutt, Petono, - and even Upper Hutt, and these places are : bound to suffer. Prices must . find' their - propoi', level. ; Thero will be . no ■ slump," said he,' "only a little cold common sense. ,-.... Rents. . The quostion of rents and demand for rented houses was also touched upon in conversations w-ith various agents. Ono agent 'stated that a good house would almost always let... " Candlo houses won't." ;'•! Candle houses? " • '.' Yes—tho sort that a candlo won't burn in; the draughts through the cracks blow it, out.- Thero wero many .empty houses in the suburbs, particularly in' Island Bay, and at the Hutt," added the speaker. "MaViy people 'double-banked' because of tho high rentals. . Every family does' not occupy an entire house, hence tho number of 'to .lets."'