LOANS FOR HOUSES

Dominion, Volume 31, Issue 104, 27 January 1938, Page 10

LOANS FOR HOUSES

Work Of Societies In New South Wales ADVANCES FROM STATE Little Interference With Private Enterprise Information about the operation of building societies in New South Wales and the extent to which their advances have been recently guaranteed by the State Government with a view to increasing the number of homes built, has been received by Mr. F. G. Williamson, president of the Wellington branch of the Real Estate Institute of New Zealand. In an interview with "The Dominion” yesterday, Mr. Williamson said it appeared that in many cases loans up to 80 per cent, of valuation could be obtained by building society members in the ordinary way, and that doubtless accounted in some large measure for the phenomenal building activity which had taken place in Sydney and suburbs during the last few years. Recently, however, the Government stated its intention to guarantee the banks up to a toal of £10,000,000 in relation to their advances to building societies. Under the guarantee members of building societies could obtain what were called “Special Home Loans” by which they could receive up to a maximum of 90 per cent, of valuation provided the total loan did not exceed £9OO. In view of the fact that housing costs were perhaps 10 to 15 per cent, lower in New South Wales than in New Zealand, this was equivalent to a loan of from £lOOO to £llOO in NewZealand. The societies were all terminating, but the terms of payment varied in different societies, being 14, 21 and 28 years. Methods of Payment. “An interesting point to notice,” said Mr. Williamson, "is that membership of a society does not make it compulsory to take up a loan immediately. Young people may join with the idea of building up a reserve in the society, ■which will eventually go toward the loan when they marry and desire to take one up. There are thus two kinds of payment: (1) the payment per unit of advance before the loan; and (2) the payment per unit of advance after the loan. In the case of a 14-year building society the unit of advance is £52 and the payment a week before the loan is 1/- and after the loan 2/-. In the case of a 21-year society the unit of advance is £55, the payment before loan 2/6 a calendar mouth, and after loan 7/- a calendar month. In a 28-year society the unit is £54 and payment 1/6 and 6/- a calendar month respectively. Thus on a loan of 10 shares for 21 years (£555) the payments after advance amount to 16/2 a week plus a small contribution’per share for working expenses. An entrance fee of 1/6 a share is payable and the usual charge to cover all managing expenses is 2jd. a share a month. “Generally speaking there are no restrictions on letting, selling or transferring the house subject to a building society mortgage and the mortgage itself can be repaid in whole or part at any time. “Subscriptions are refundable after 12 months and after 24 months they arc refundable with interest. In the case of a typical society—the Manly Co-Operative Building and Investment Society Ltd. (a 21-year society) the subscriptions payable amount to £3l 10/-, compound interest amounting to £33/10/- over the period,a total of £55 being the value of the unit of a 21-year period. Use of Loans. "It is interesting to note the general absence of restrictions and the uses to which loans can be put,” said Mr. Williamson. “For instance, with an * ordinary loan a member maty: (a) Acquire existing property; (b) acquire land and build thereon; (c) build on land owned by him; (cl) discharge an existing mortgage. With a special homo loan a member may: (a) Acquire existing house property; (b) acquire land and build a home thereon; (c) build a home on land owned by him. In the event of a sale of the property the shares are transferable. “The Government supervises the operations of societies and exercises oversight over their accounts and valuations and generally over their management, thus protecting the interests of taxpayers, members and others concerned. In addition ,a co-operative building committee has been constituted by the Government to advise in the conduct and operations of societies, including their finances, and qualified persons are available to advise and assist in-architectural, building, legal, accounting, actuarial and administrative details. “The co-operation of the Real Estate Institute of New South Wales and estate agents generally has been asked for and freely given, and the Government advertises to the effect that details of societies may be obtained from estate agents and others who are supplied

with the necessary literature. The directors oi l the societies comprise eminent citizens in Ihe locality—doctors, lawyers, accountants, estate agents and others. The success of the scheme is proved by the surprisingly large number of societies registered under the scheme. “According (0 the latest pamphlet issued by the Government, there are four 12-year societies, two 14-year, 10 15-year, no fewer than 76 21-year and 31 28-year societies, while more are being formed. Thus the Government has been enabled to keep almost entirely free from interference with private enterprise and from engaging in the housing business. “Whole undoubtedly the ultimate Government guarantee enables the scheme to be launched, it is doubtful whether any but a negligible amount of money will be lost by the Government as the details of the scheme are conducted throughout by private enterprise on strictly business lines ”