SAVINGS AS HOUSE CAPITAL

Evening Post, Volume CXV, Issue 139, 15 June 1933, Page 10

SAVINGS AS HOUSE CAPITAL

Reviewing civic affairs before the Wellington Ratepayers' Association, Dr. J. S. Elliott "pointed out the insecurity pf savings that had been invested in house property, much of which was now a burden."' While it is true that rents have fallen, and in cases, have' 'ceased, the situation is not lac.king in- signs' of change. Those savings that have become housing capital have been attended with a sad' loss of income, but, as was noted in a recent news a/licle in the "Evening Post," a certain reviving demand for houses gives at least some promise that the capital value is not depreciated to the same extent as (lie ■ rental value is at' the moment. A factor tending towards higher rents in the ( future is the diminished house-building, which connotes house-hunger- later. A factor that may be a check on too high rents is the lower cost of .building (particularly the lower cost of housebuilding with an Unemployment Board subsidy at tlie rate of 50 per cent, of labour cost), which will put into the competitive rent-market a certain number of houses of low capital cost. But there is as yet no evidence that the subsidised building industry is likely to turn out new cheap houses in such a quantity as will countervail the dearth caused by the previous collapse of building. What the Unemployment Board no doubt aims at is a revival in industry and wagesy more calculated to produce rent-payers than to undermine the capital position of savings invested in houses. Danger of an excess of houses, due to subsidy, would be correctable. But it is no duty of the State to protect the' capital position of houses bought at boom prices, on a false market. Nor, on the other hand, should the Stale use public funds and incur loan and interest losses by creating a boom so that necessary 'private-' capital is driven away from this form of investment through disappearance of profit in the subsequent slump. There is no statistical guide to the fall in total rental figures. Probably'many houses are still bringing a rent which, if. it means no profit, means little or no loss. A house financed on a Government table mortgage, even if the rent pays no surplus above repairs, insurance, rates, and depreciation, is, still improving the capital account; in other words, there is loss of income, but at the same time capital advancement. Owing to world-wide /causes, at: the momeiit no one knows the real value of anything. To state ,a value in terms of money has been quite uncertain since'the value pi money itself; began to alter. As every Government professes a policy of price-raising, they will be very impotent Governments if prices do not alter before long; and as the United States Government" lias lately taken new steps in currency inflation, and in other forhis of• inflation, is'it reasonable to expect that prices of commodities and services, including housing, will slay down? There are, however,, many who fear that prices may be rather too uppish, and, later, too erratic. That is a question; that depends on • management. A g-reaj deal has been heard of managed currencies, of managed inflations, .of reflation, etc.^ Whether the implied managershipexists no one knows. It has not been conspicuous in the past. But at least it may be said that the prospect that world* policy will raise prices is reasonably good, and that rents, like other values, will not "stay put." How sectional interests will fare, when the new balance is struck, remains to be seen. '*■■ Nothing in sight is likely to abolish the need lof houses.