INCIDENCE OF TAXATION

Dominion, Volume 16, Issue 173, 10 April 1923, Page 6

INCIDENCE OF TAXATION

IS MONEY AVAILABLE FOR RURAL DEVELOPMENT?

BANKER SAYS LOAN STILL PROCURABLE HOLDERS MUST PAY FAIR INTEREST

(H) Replying to a review of the general situation in regard to taxation and advances on land security by the chairman of the Taxation Commission, published in these columns yesterday, banking authorities assert that, if landholders limit themselves to a reasonable proportion of a reasonable valuation, and are prepared to pay a fair rate of in- , terest, money is still procurable for loans on land security.

“Is your correspondent right in his facts?” asked a leading banker of a Dominion representative yesterday, alluding to a letter, from a landholder, published yesterday, saying that' money was unprocurable for investment in land to-day, whereas a few years ago advances against land, were looked on as a most remunerative investment.

"If the facts as to which he asks for explanation are incorrect, explanation is hardly necessary,” said the banker.

"Your correspondent seems to suggest that there is now less money invested in land mortgages than there was a few years ago. So far from this being the case, the Y’ear Book shows that at March 31, 1914, the total amount of mortgages was £106,442,297, while at March 31, 1922, it had reached £231,140,104 —an in©rease of £124,697,807, or a growth of 117 per cent, in the period of eight years. “The fact really seems to bo that, owing to various causes —principally the high figures quoted as land values, and the extension of a system under which purchases of land were arranged for people who ihad hardly any money —the demand for loans on mortgage lias enormously increased. At the same time, other modes of investment are offering greater attractions to some lenders.

LOANS TAKEN UP LOCALLY "Until the last few years, a comparatively small amount of the Government’s borrowing was done in New Zealand. Since 1915 the proportion has increased very greatly. Of war loans alone, 55 millions have been taken -up in the Dominion. At the same time, borrowings by local bodies have been very considerable. Since 1914, seven millions for local body purposes have been raised in the Dominion. Investments of thi? nature have made an appeal to many people who formerly did not touch securities of tlm kind. Th© convenience of the method by which the income is received, and the ease with which the capital can be' realised by sale through a broker, have undoubtedly induced many private lenders to adopt those methods of investment. “Some of the experiences which fell to lenders owing to the moratorium; the doubts which still exist in many minds as to what may be regarded as permanent land values unt'.l the moratorium is lifted; the losses which it is notorious that some mortgagees have suffered during the last few years; and the difficulties which many of them have experienced in collecting their interest when due; these have all no doubt had some effect in making mortgage investments less popular than they used to 'be. Notwithstanding this, however, as is shown by the table at page 565 of this year’s Year Book, money is still procurable by owners of land.

If tho borrower only requires 3. reasonable proportion of a reasonable valuation, and is prepared to pay a rate of interest which fairly represents the .present value of money, money is, I believe, still procurable.

“What is a fair rate of interest? Well, here is a recent Australian share list, which shows that investors can obtain, by buying Commonwealth Bonds, a return of £5 13s. lOd. per cent., Victorian Government securities can bo bought to yield £5 9s Bd. A New South Wales Savings Bank Loan, guaranteed by the Government, yields 5J per cent. These are loans of fairly long cuiTency, and fr-ee of income tax. Private borrowers on landed security must expect to have to pay a figure in excess of that, which is returned by these convenient, convertible, and undoubted investments.’’

TOWN AND COUNTRY MORTGAGES The registered value of mortgages on country property (as apart for town or suburban holdings) constitutes 62-2 per cent, of the total amount secured. The acreage on which these advances are secured represents in the case of country mortgages 99.84 per cent, of the total, and on town and suburban property 0.16-per cent. only. Hie average amount or each mortgage on country property is £1274, as compared with £551 on town and suburban holdings. The total area of country holdings involved .in mortgages under the Land Transfer Act, 1921-22, is 5,469,212 acres, and tho amount secured £17,744,501, as compared with £16,032,899, unddr the 1915-16 Act for the year ended March 31, 1916. The amount of mortgages discharged for the vear ended March 31, 1922, was £13.234,365. compared with £29,464,132 for 1921 and £23,086,746 for 1920. During the first nine months of last year a very marked shrinkage in the value of mortgages registered, as compared with tho corresponding period of 1921, took place. Tho decrease' indicates that only about half the amount of money has been lent on mortgage during 1922 as compared with 1921. and a comparison •Zth ».o 1920 figures shows a still greater falling-off. Tho position is no doubt due to the reluctance of investors to deal in mortgage of real estate, possibly on account of the comparatively high values placed on such property. . „ L . 1 (Tho third of this scries of articles will appear to-morrow.)