The Waikato Times With which is Incorporated The Waikato Argus. SATURDAY, JUNE 23, 1923. ADVANCES TO SETTLERS.

Waikato Times, Volume 97, Issue 15272, 23 June 1923, Page 4

The Waikato Times With which is Incorporated The Waikato Argus. SATURDAY, JUNE 23, 1923. ADVANCES TO SETTLERS.

The proposed amendment to the Advances to Settlers’ Act provides for an increase in the amount which can be lent from £2OOO to £3OOO and from 66 per cent, of the value to 75 per cent, of the value. In view of the demand which will exist from now up to the date when the moratorium is to be lifted (December, 1924), something of the kind was imperative. War legislation has created a prejudice against mortgages, which will not disappear immediately the moratorium has gone. Mortgages will be at a permanently higher rate of interest for years to come. For the sake of a temporary advantage all producing interests will be hampered to some extent. As a set-off there is the consolation that money is likely to be cheaper in years to come than it has been, and indeed it is at the present time at a higher rate than justihed. Capital is very fluid; it is extremely plentiful at Home for all kinds of gilt-edged securities. There should bo no trouble in obtaining wiiat is required, and it is only the rate set by ttie Bank that is keeping interest as high as it is. At the same time, it must lje remembered that there is a good deal of Uneasiness felt about valuations. The instances which have been quoted of prices paid for land in

excess of its value have alarmed those who control the lending of money, and properties which have not been overvalued are likely to suffer with those that have. The Government eafe-

guard themselves by relying on the valuations made by the Valuation Department. Mr Wilford challenged these valuations, and said the increased amount which the department was to lend would not be effective unless the methods were changed. We do not suppose that his further statement that the Valuation Department reduce their own valuations by 25 per cent, before sending them to the Advances Department can be substantiated, but the Valuation Department is one which requires to be brought up-to-date. If their figures are to be the basis for large advances it is obviously unjust that there should be such long intervals between the periodical review of values. At present it is done about once in 10 years, and in such a length of time there may be great changes in the value of a property. It is, of course, possible to have a special valuation made, but this is exactly what should ’be avoided, as it opens the door at once for favours or the reverse, and the possibility of such a thing is the great argument against the Government becoming the mortgagee of so many properties. It is obvious that if a great reduction in values took place the Government could not foreclose. There would be pressure brought to bear and the Government would succumb, and pass the loss on to the public. Private mortgagees would also have to compound their claims, but this would not affect the political position. It is useless, however,' to point out the dangers and drawbacks to" a system of Government advances. We have to face the situation that has been created, and there will be no alteration before the drawbacks reach a stage wdiich compels attention.

The loans on mortgage to settlers are a much more business-like proposal than that for housingp although this is not quite so bad as appeared from the first report of the GovernorGeneral’s speech. The Government propose to advance 95 cent, of the value of land and building, which is obviously much further than it is safe to go. A man might find the 5 per cent, and fail in the payment of the first year’s interest, but he would have lived in the house for 12 months at less than he would have paid for rent, or for the interest and sinking fund. There has been much discussion concerning the price of houses, and it seems to be agreed that nothing satisfactory can be provided at the present time for less than £9OO. The interest on this amount at 6J per cent, would be £SB 10s. Insurance and rates would be a further £lO, while the upkeep of a wooden house requires at least 2 per cent, -of its value. This would bring the payments to over 30s per week, which is too much even for the man who is earning £3OO per annum, and is worse for those with smaller earnings. The housing difficulty is the price of houses, and the Government would render much greater assistance by remitting the duty on materials than they will do by advancing 93 per cent, of the value of the property to men of limited incomes. It is not probable that much advantage will be taken of the offer, for there are not many men who are so fixed in one spot that they can sink all their savings in a house on the terms which the Government propose. If, however, the scheme is taken up largely we should anticipate a considerable loss on it at some date not far in the future. If the Government are to advance money on houses, it should only be on houses in brick, ‘stone or concrete. Wooden houses will have passed out of existence before the loan from which they were built is repaid, or if the repayment is calculated to extinguish the loan in a moderate length of time the sinking fund is so heavy as to put the proposal beyond the reach of a working man. To repay a loan in 15 years would require a sinking fund of about 5 per cent., which, added to the interest, would be prohibitive. The Government has left undone what it ought to have done, that is remitted the duties on building material, and proposes to do those things it ought not to do, that is advance 95 per cent, of the value of a property to men of small means. The result will not be to remedy the difficulty over housing, and it is possible it may even make the position worse.