REVIVAL, NOT BOOM

Evening Post, Volume CXVI, Issue 2, 3 July 1933, Page 8

REVIVAL, NOT BOOM

The effect of the artificial stimulant of a subsidy on building is not well j known, though the Unemployment Board gained useful experience with last year's No. 10 scheme. This I year's renewal of the scheme is on broader lines, and may induce greater activity. Christchurch reports "signs of revival" in building as a result of the scheme, and the applications in other towns also indicate that investors- with building proposals are preparing to carry them out. There have been one or two complaints, however, that the scheme may be too fully effective, and may so cheapen construction costs that existing equities in buildings will diminish even more than they have done hitherto. The reply, usually made by those who have no property interests, is: "Quite right, too. Values are 100 Ligh, and must conic clown." But this is not

consoling to the owners, many of them persons with small means, who have seen the margin between mortgage and value grow less and less, and, in many instances, disappear. They bought or built in good faith,' often without a speculative incentive, and even if they do not wish to sell now they cannot view with equanimity the possibility that, if they should sell, there would be no cash over mortgage for them. Of course building-investments cannot be specially sheltered from the storm of economic adversity, but it is legitimate, to ask if the Government should use special funds to induce further depreciation, thus increasing the losses of present owners, and driving capital away from this form of investment. If this were the Government's purpose, it could be said at once that it is not wholly fair to investors, and must in the future react adversely on the interests of tenants. Too much stimulation with public funds leads to a boom. This we have seen in land settlement and in house-loan schemes. But the Unemployment Board has not this in view. Its first aim is to give a little help to an important industry which is unnaturally depressed. Building, because of earlier boom prosperity, has declined even more than the times warrant. If its recovery can be stimulated tradesmen will be absorbed. A secondary purpose is to prepare for a rising house demand. Recently the statement was published that in the last three years at Hamilton 92 houses were built and 727 marriages, were registered. Thus there has been one new house to about every eight marriages. Where did the other seven young couples go? Probably a similar situation has arisen in a good many places, and it may be conjectured that the contraction of existing families into a smaller number of houses has left a surplus of houses to be occupied or shared by the newly marridd. If the sharing principle were persisted in far enough a quart might be squeezed into a pint pot, but it of course represents the negation of, all that has been aimed at in housing policy. Sooner or later there will be a change. While house-building marks time, and marriages continue, a potential house demand is being built up, and at the first sign of returning prosperity it will make itself felt. Then a deep depression in building will change to a small boom. Artificial stimulation now may check, that, and make demand and supply run side by side. But the Government will require to watch its stimulation policy carefully, or else a desirable revival will become an undesirable boom.