BUILDING REVIVAL

New Zealand Herald, Volume LXXIV, Issue 22851, 5 October 1937, Page 10

BUILDING REVIVAL

DETERRENT FACTORS OWNERS' UNCERTAINTY COSTS AND STATE ACTION OPINIONS IN AUCKLAND Post trade revivals in Auckland have normally been followed by rushes of building for all commercial purposes. Although a certain amount of new construction has taken place in the past year and more is in prospect, it cannot be said that industrial and mercantile building in the metropolitan area is recovering as quickly as would ordinarily be expected, So far as manufacturing industries are concerned, definite evidence is not plentiful, but there is enough to suggest that a good many concerns are delaying further capital expenditure for the present. An architect with whom the position was discussed said that while he could not say definitely that the amount of work in suspense was greater than usual, two instances had occurred in his own practice. K'ew Factories Countermanded

Twelve months ago he had been working on plans for a factory costing about £6OOO, to be built on a section which the clients had purchased. It was necessary to stop until information was obtained from abroad, and when it arrived the industrial situation had changed so much that the company decided to abandon the project and the soction was now for sale. Four months ago he was consulted about another factory of similar size,. but shortly after the firm in question dropped the scheme and decided to lease a small factory instead. In this architect's opinion, there was enough work in hand to show that where building costs alone were in question, a good many clients were prepared to go ahead if they saw a reasonable return on their expenditure. Such concerns took the view that present costs were here to stay for some time to come, and it was useless to wait until the situation became easier. Graduated Taxation Other informants considered that increased building costs were less of a deterrent to factory expansion than uncertainty about the Government's intentions regarding taxation and the regulation of industry by State action. One man said that the owners of a family concern known to him had virtually decided for the present to stop using profits for the development of the business. Their view was that the larger it grew the more the Government would take out of it in graduated land and income tax, leaving a comparatively meagre return on the extra capital.

Time-lag in Rents

As regards shop, office and warehouse construction, it was learned that one projected warehouse building had been abandoned because the increased costs would not be covered by the rents that the owner could expect to obtain. The informant in this case put forward the theory that the time-lag between the improvement in business and the natural rise in rents had not yet elapsed, and that when rents reached a normal level, as they must, a revival in mercantile building would occur. At present, he said, the level was determined by buildings which had been erected when costs were lower and which were still giving their owners an adequate return. The same man suggested that a lag in building was almost to be expected as a direct result of the Government's action in artificially accelerating the return of normal times for one section of the community. It was natural, he thought, that such a rapid change should produce a feeling of uncertainty, and most of all among those who thought of investing their capital in buildings. It was to be hoped tnat this feeling would prove to be unwarranted before very long, but no one at present could say when it could be expected to pass off.