Capital and Rental Value.

Gisborne Times, Volume V, Issue 139, 22 June 1901, Page 3

Capital and Rental Value.

(To the Editor.) Sir, —Since of lato so much gross ignoranco has been shown here as to the proper manner of valuing property, it would interest many of your readers to know how the proper value of property is arrived at, and by way of preface, let me say that the value of property is not the speculative, the sentimental, the “ what-you-want-for-it,” or the dummied auction sale, or the price of the proprietor . who has or intends to mortgage his property to tho last farthing of its value. For the valuation of property it will be necessary to ascertain—(l) The annual value ; (2) the capital valuo. The annual value is to be obtained in most cases where property is let, from the net income received by the proprietor after deducting from his rent the following charges, viz., depreciation and repairs to fences, depreciation, paint, and repairs to houses, rates, insurance, collection, and an allowance for bad tenants. For example, find the value of a property for which tho proprietor receives £75 per annum. The house on the property cost £3OO, fences £lO.

£ s. d. Annual depreciation of house at 2 per cent 6 0 0 Do. paint and repairs to house at 21 per cent 7 10 0 Rates, insurance, collection, and bad tenants at per cent. 915 0 Annual depreciation of fences at 141 per cent. 19 0 24 14 0 From 75 0 0 50 16 0 This leaves, say, an annual value of £SO ; capitalised at, say, 5 per cent., or 20 years’ purchase, £IOOO capital value ; but if interest fell to 4 per cent., the capital value would be £1250. On the other hand, if interest rose to 10 per cent., the value of the property would only be £SOO. The above refers to cases where the rent is fair and in accordance with rents received for similar properties in tho same neighbourhood. With your consent, in a future issue I will deal with the valuation of pastoral lands (unleased). —I am, etc., A. Y. Ross.