Steadily Increasing Prices for Generally Considered By Courtery Ai Land but No Sign of What is a Boom in Progress sia Realty Ca.
A land boom, according to the dictionary, is a situation where we find rapid growth in market value or in popaler favour; where a town district is developing rapidly in resources and population. Uccording to the man in the street, a boom in real estate implies moi ordinary boom purchaser "has intention of becoming the outright lowner, but hopes to sell again at thigher price before the boom shes, Little consideration, if any, is given to the intrinsic value of the land, nor to the return it could be made to yield as an investment, The usual boom procedure $s to purchase on option, rather than outright, making a down payment of 15 per cent. or thereabouts. Upon small margins, options are pasted from one party to another perhaps through a long series of "sale Very often it would be quite impossible for the "purchaser" to Jearry out a real purchase, for want of cash.
According to the dictionary, we fare in the midst of a real estate boom. But clearly, there are indications whatever of boom conditions in the more exaggerated sense, nor do we see any likelihood of such for the future. We hope there will be none. In Shanghai the option as described above simply does not exist. Bona fide options are well understood, but the pyramiding of options as under boom conditions is unheard of, Purchases are made outright with full feash payment, or at least arrangements for fail payment. Furthermore, the investor in Shanghai real estate invariably considers carefully the intrinsic value of what} he is buying and calculates the yield he will receive, and how he can best improve the property.to make it produce a good return. In the ease of bare land, he carefully] considers the rise in price of land, not only during the past year or two, but daring the 30 or 40 years past, and he estate on which he may expect a normal increase in price up to the time when he is prepared to develop.
Nevertheless, the increasing price of land at the present time gives food for thought. There is plenty of money in this city seeking' investment, Debentures at 5 per cent. and G per cent. are quickly taken up. The few mortgages offering are covered at once, Quotations on shares have advanced substantially in the past year. Still there are many large sums of money seeking even a fair return, and bank vaults are full to cverflowing; even space to accommodate the metal is a problem.
Such a financial surplus brings about conditions which were foreseen, principal among them being a downward tendency in interest rates. Rates have fallen materially, and there may be still further decline, ird rates which prevail in other} money centres. This could only come about ina community where a feeling of investment security prevails.
Lower interest is having the ex-ceted effect on returns from real property. Whereas some years ago an investor might expect to receive 9 per cent, to id per cent. return fin rents ona developed property, he fs now fortunate if he can secure 8 or 8} per cent; large sums. are oftering for reel state investment to produce 7 per cent, or even less, The money situation has, up_ to the present time, had little' effect on rents, though we may hea from this later when business improves. But the interest situation has had decided effect upon the prices of] real estate, At.the present time, to realize only 7 or 7A per cent. return in route, @ property brings much higher price than one or two years ago when the return had to be 8 per cent. or more, With silver a: such a low ebb, investors think of their holdings in terms of gold and fix prices at from 40 to 60 per cent, higher than say a year ago. This explains part of increase in price of land. If, however, -the property owner con; ideas his holdings in gold, his return on what he considers the market value will fall far below the customary rental income rate, This problem of return on invest: ment may be answered in several ways: by future ineresse which will have to be expected on account of higher priced land and also on account of increased building! Joost; by further decrease in inter rates; and by an expected annual return on a property due to the normal increase in the price of land, Land prices are not inflated; the present trend of prices is explained by quite normal causes. We have freely predicted this condition during the pact year or more, and for the reasons set forth above, Strange to ray, we still occasionally hear the statement made by Shanghai residents, generally for-to the effect that. prices in are higher than in other countries. We have frequently. set forth in these columns interesting] items showing what prices obtain in other great cities. While there fre occasional slumps, such as the real estate slump which has just|hé been experienced in Los Angeles, the general trend of real" estate prices is decidedly upwards. Thi is particularly true in such' cities as New York and Chicago, where ich year sets new records in real estate values. At the present the relative position of Shanghai and stands about the same as it Idid four years ago, when a careful study of land values in big. cities in different parts of the world was made. Briefs, values Shanghai ron from one-fifteenth to one-third of the value of correspond ing areas in other great cities with which Shanghai is to be compared.
We repeat: Real estate prices in Shanghai are not advancing aimlessly; they are advancing to-/wards. comparative equality with land prices in other great cities, and the advance has been quite normal.
We have tocome accustomed to large and increasing monthly turnover. The month of June has probably equalled in volume any previous month in the city's history, the reported transactions totalling. something like ten million tacle. 'There have been, of course, numer lous' other transactions which have not come to public notice; but the above figure represents the bulk of what has been done. The centres of activity have been the contra! istrict, Bubbling Well Road, and Avenue Joffre, with a sprinkling of transactions in all parts of the city. Inquiries continue strong and offers which have been mide properties have been rejected, the owners preferring to retain their investments or wait for higher prices. 1
Most fniteresting of all, perhaps, the resale of the Gill! residence Jon Avenue Joffre, 22 mow, which has changed hands for the third time in as many months. 'Thin splendid residential estate' which fold at Tls. $35,000 three months reported to have gone into nds of a large British cor poration at something like is. 400,- 000. A' large transaction on Woosung Road was turned at Tls. 100,000. A _18-mow apartment property, on Bubbling Well Road brought Ts. 800,000.
Tu the central district, the Sunt Life building is said to have chang ed hands, and. the Sheng on Szechuen Road was sold at Tls. 600,000, to a foreign buyer.
Other reported transaction; 8 mow on Medhurst Road, is, 750,- [000; an eld property on Yates Road near Buboling Well Rond, at Tie, 58,000 pin: mows a property on Foochow Road, mow 22, recently ought at Tls. 125,000 per mow, sold at Tle, 170,0005) a property on Manila Road, Chinese shops and houses, Tis, "160,000; a group of Chinere shape and houses near the Great World, comer of Routes Palikao and' Weikwei, mow 2.7, Tis, 200,000; the corner of Burkill and Chengta Roads, about 2% mow, 240,000, old Chinese shops and 'a property at the, comer of Fukien, Peking, land Soochow Roads, 1} mow, for Ts. 145,000; and some 7 mex at Avenue Nanyang and. Hardoon Roads, Tls. 230,000. Again in the Northern District, a mow piece at North Honan and Haining "Roads changed hands at The, 50,000, per mow.
A little further out: the Joseph property on Avenue Joffre, 15% mow, sold £0. Chinese syndicate at a price "aid. to be Tis, 345,0005 7 mow on Route Vallon, with, two ald residencer, Tis, 150,000; 5 mow, Chinese shops and houses, at the corner of Averue Foch and Hart Road, Tle. 200,000; a large residence on Route Ferguson; on Avenue Petain, two platt of 20 and 17 mow, one ay Tle. 5.000, and the other at nearly Tis, 8.000; properties on Pere Robert and Roare Ratard; and two plots on Route Frelupt at, between Ts, 8,000, and Tis, 9,000 per mow.
In the strictly residential district farther west there have been sev= oval interesting.developments, We understand that both sides off Columbia Road leading south from Great Western Roail, have been bought up vy @ group for residen~ tial purposes, and that next year will see the erection there of several fine homes on from four, to eight mow "each. Ju Columbia Circle there have been several transac tions, residences and building lots. Tunsin Road has also come in for Building construction throughout the city continues unabated. The sudden severe drop in exchange in the early part of June came as a shock to those with building oper ations in hand. Where contracts, been let and exchange settled, the situation is easy; the value of the new construction is simply en= hanced, in terms: of silver. Not~ withstanding exchange, inquiries from partic who contemplate "x= tensive building in the immediate future indicate that work is to 0 ahead. Already we find rents ale vaneing in certain quarters, and one large apartment house has already given notice of an ineerase of ap= proximately 25 per cent.
So much has been said in the press concerning the sale of the Telephone Company that merely mention it. The passing: of this, public utility from " quas public hands to become a strictly commercial enterprise was to be expected after the sale of the Municipal Blectrieity Department bout a year ago. Tt has a strong Dearing on Shanghai real estates that there should be such keen bids ding on the part of three strong' outside interests peaks. well for the esteem in which Shanghai enterprises are held,
Text read from the printed page and cleaned; old type leaves the occasional error.