Angle of Dip in Values

NZ Truth, Issue 976, 9 August 1924, Page 6

Angle of Dip m Values

Some Deep \ Descents

Multi-Mortgage Farms on which Even the First ? , • Mortgagee Loses v

The disappearance of subsequent mortgages, on rural lands— mortgages brought about by speculative sales m boom time, and representing values that never really existed— does not tnerely mean the dispelling of a 'fiction. It too often happerfs that the real value of the mortgaged property heavily depreciates while the mortgagors quarrel over it; and its usefulness as a farm may fall, through neglect, to such an extent that it is not worth the security valuation fixed m the first mortgage.

The' degree of the. rural land deflation m Taranaki may be guessed at by citing a lew specimens. It. should be carefully borne m mind, however, that these cases are not quoted as average; still* they are sufficiently numerous to give some idea of "what geologists would call the "angle of dip" m rural land values. The dip is, of course, steepest where the upper strata of inflation-deposit are thickest. , ">, A financial institution of public importance thought it 'was investing its funds wisely when It advanced £5000 on a Taranaki farm. R. As a rule, such an institution . invest^, conservatively, and everybody agreed that the investment was conservative when three subsequent mortgages were, raised on the land, bringing its apparent value to £12,000. But since the slump all that paper value has disappeared, and the ultimate realisation by the first mortgagee (the institution referred to) resulted m the property realising £4000. That is to say, the conservative mortgagee lost £1000 of its advanced capital. '■ - ; ■ ■ ■ • : >; '■<- : .'- ■'■ There Is' another institution which is also conservative iti its investments, as it is handling trust money. , Well, this institution advanced £4 an acre on a Taranaki farm. The usual crop of Subsequent mortgages (resulting from "sales at a profit") arose;, but all these have now been weeded outi and the farm is back m the hands of the first mortgagor. The farm at the present time, and m its present condition, is

quite unsaleable. But the first mort-, gagor has other assets that are good, so the institution does not seem to be likely to lpse. Note, however, t;hat its security is. not the land .mortgaged; its' security now is the mortgagor. The security itself is .no longer a liquid Even where the security, value, that formed the basis of the first mortgage, was correctly arrived atr the 'mortgagee is not necessarily safe, because, m. the course of being tossed about between the various : moctgagors,' the farm is neglected; deteriorates, perhaps igoes^ back to "second, growth," and * may become 'not an .asset, but a. liability. How to prevent this process of deterioration (a x national loss) is a question that has been raised - before m "Truth." lt| is not easy to answer. . . During the financial debate m the House of Representatives last week the Minister, of Lands, Mr. McLeod, Btated that at the back of Taranaki, between there and the < Main Trunk, there was a great deal of land m a distressing condition. It was settled by the Reform- Government, some of it by the Liberal Government, m good faith, but he knew that the condition of it warranted the Government re*mitting the rent for five or ten years, otherwise it might go out of occupation. : .'■•■„ ' But what, constructive proposal /*fs Mr. McLeod prepared to make? .''''■■