FREEHOLD SECURITY.

New Zealand Herald, Volume LX, Issue 18461, 26 July 1923, Page 9

FREEHOLD SECURITY.

• / ' —— --r AFTERMATH of THE boom. I SWING OF THE PENDULUM. ' greatly REDUCED values. + Wherever, inquires ;as to the atti-. ' tude ' of • .lending institutions in regard V° land securities, one finds evidence of Very conservative policies, although there is reason to believe that no policy is as fixed as might' be inferred. The reason is that all sorts of degrees of security are met with. . The farms for ivhich no finance can be arranged' are those which, during the boom period, were simply regarded as gambling counters. They were sold and gr Id again, and• it would take the .proverbial Philadelphia lawyer to state , the precise position of all . the interests involved. . As a. prominent financier stated vesfrom hand to hand during the boom are tj*f to hand dnrmg the boom are beyond hope as far a s fresh finance is in S l , sooner those involved shoiildnr ? laCos ,*»!»? that someone must shoulder heavy IoSS he said, " the better will it be for the general, weal/ Not save i th people who, having tried to make fortunes out of land are ?h£j 10U t 3 i to I l ealise on their second, third, fourth and L sometimes additional mortgages. -Why should.they blame financial institutions for refusing to T-artake of the fruits of their folly?" . Instances of Reduced Values.. From further inquiries, however, it is evident- that land values have receded very considerably. Indeed, in tre opinion of. high authority the pendulum has already swung to extreme low values, and that for those who can at present find half the money, t-hs policy of finance institutions being to lend only hall the value of the security, there are at preiv—j wonderful opportunities through third, fourth, a.nd fifth mortgagees rehquishing their claims. A .case was cited where & property that • changed hands at 'Over £10,000 was taken over by the second mortgagee at' £6000. , The man oould u Dot eo .wrong, -an if a loan :cf half that value was not• safe nothing w?s.. Another case ; was _ mentioned where a ln the Haurtiki district that reached £100 ■an acre during the" boom .was sold recently for £5iS. The . first and second mortgages were, secure, ibut the third mortgagee accepted £500 for an interest nominally worth £5000. A Waikato farm sold three Lor fc!T times ' during the boom, reaching a price of £62 an acre, was bought nine months ago for £33. In this case the second mortgage. of ,£<JbOO was discounted 1 for £1500. • Great Benefit of Herd Testing. '! Yet," said. the informant, "the man who lis farming esac&Jy similar land! adjoining has proved that" he can show a good return On; a basis ,of £62. The reason is .that he -is a good farmer and hasadopted -herd-testing., In five years he- has bred up a herd that averages 3301b. of butter-fat., against 1801b. at the outset. * As a matter of 'fact,' he culled eight cows averaging, from 230 to 250 lb., and put them into a sale with that guarantee. ; All he was; offered was thirty shillings each, no one believing that cows with, such an average would be culled by anyone.!. / ' , " Success in the country depends upon l capacity and energy, just as it does in the .city. In Auckland, you . can find men [ paying , a rent of say £30 a week and | making money. Others who regard mornj ing and afternoon - tea and. an occasional game of billiards, as - necessaries of life I ask them how they do it. There is no set standard ,of rural securities owing 'to- the varying capacity and enterprise of : ; farmers. The , man who builds up a herd, of high. butter-fat standard • probably paid at the' outset £150 1 for a pedigxee bull. The result is that- every calf is worth a - pood ; round sum. His neighbour who still struggles along without getting ahead of debt, probably is breeding from a scrub bull that should be shot, on sight. Many farmers could. double their butter-fat yield in a few years at small expense, but 'hey cannot be compelled to do so, and that is why many.of them remain in Ihe.rwd.'' " The reason why farmers with safe security to offer .have sometimes been at their wits' end ■ for money," said an Auckland financier, " is | that company taxation has ■ made mortgage business by companies utterly / impossible. . Some of the largest concerns have not lent on mortgage for several years, high company taxation having . compelled them to sol! -what- mortgages they held and to invest in tax-free, gilt-edged securities. A reduction to 5s in the pound * has been : promised and this may : make some -capital available for investment on mortgage, but the margin of advantage is very small— half-a-crown per cent.and where ■ Government securities are below par ,there -is no ad-va^tagb-i>t all." •. Need Tor Maintaining Production. At the same time, he continued, 1 lending institutions recognised f the vital importance of maintaining ■ the farmers on theiV farms and assisting to the fullest, extent in .the development of the , natural reproductive industries of the country. V If : all financial institutions were to adopt an attitude absolutely debarring , mortgage investments on land, it was time for them to consider : the value :of the security of public bodies' loans, into which so much capital had been deflected. Eating values were the basis of local body v securities, and to depreciate the' value of . farm properties would be to depreciate the value of public body. debentures. It would be found, he added, that the policy Tof institutions which had money to lend on , mortgage was, consistent with: safety,. to give preference to the reproductive farming : propositions. With the elimination, often at a dead ( loss, of mortgages beyond the second, many properties were now 1o be had at much less than their present value, and finance was usually available for those who could shoulder half the

price. - - : ' , Savings Bank's Policy.

Questioned as to the policy of the Auckland; Savings • Bank, the manager, Mr. J. Muir Barr, said that during recent years the bank had not had a great deal of money to t lend, but ■, it ; had not declined to advance on farm land that was in 'occupation and.offered a safe margin. A conservative " policy, however; ' had been followed, and no farm mortgage had been anted without two of the trustees making. a personal investigation, apart from the .valuation, of the bank'sofficial valuer All applications for loans on land , notbeing farmed had been refused.. Generally speaking, however, the bank had been giving preference of late to loans : for building in the city ana suburbs,, not necessarily because the security was • considered better than farm lands, but to aid housebuilding operations. . '