Aug. 12.
Last year Mr. H, M, Cumine—as he frankly admitted to his share holders in general meeting on Monday—was inclined to hope that the depression in the real estate market of Shanghai would lift in 1936. That expectation, optimistic as it was, has not been fulfilled. On. the basis of his experience with the West End Estates Ltd., Mr. Cumine declared that the outlook was "dark indeed." He went so far as to discount recent predictions of an easier money situ tion. He doubted whether an early revival of general prosperity would accrue if the depressed condition of the real estate market is to be liquidate ed by foreclosures without dis crimination, sales by auction at limits fixed below mortgage values and such drastic actions, for the cases re too numerous to be treated as isolated ones, as it is a fact and general knowledge that the number of mortgagors carrying defaults in interest is very great, Relief measures were urgently required, Mr. Cumine held, and he suggested the lowering of the rate of mortgage interest in order further to facilitate the reduction of rents—a process which, he averred, mortgagors had readily applied "to a considerable extent as a contribution towards the gener: welfare." To this opinion consider. able weight will be attached, It comes from a long experience of conditions in Shanghai and from a business man whose stake in this city is recognized. Although it) would be pleasant to take issue Mr. Cumine and endeavour to restore him to his optimistic mood of 1935, candour prohibits such an. effort. The signs of a break in clouds which have oppressed thi city have been discerned by som by no means irresponsible, obser= vers, but the general opinion is that it is far too early to attach signifi~ cance to such portents, This is naturally a time of the year when, the seasonal slackness of business shows itself, but that does not dis~ pose of the uncomfortable fact that Shanghai's approach to recovery has still to be found. Extreme pessimism is to be deprecated, for the inherent vitality of the place will. sooner or later assert itself, Realities must be faced, however, Mr. Cumine's general thesis has to be regretfully endorsed.
No-one would be so foolish as to believe that the financial interests which derive important patronage from Shanghai could be blind to the need for sympathetic study of the prevailing conditions. It is as much to their advantage as to that of the interests for which Mr. Cumine pleaded, that the spell and a readiness to take the long view are essential factors for the Successful assault on the depression. It is fundamentally important that the problem should be viewed. aright in its proper perspective that remedies prescribed may have the best chance of attaining the object desired. Apart from the general economic disturbance which has contributed to the depression in Shanghai, the peculiar upheaval in the real estate market has to be seriously taken into account, Unrestrained confidence in highly inflated land values of a few years ago has brought about the inevit~ able reaction to which the collapse of world trade has added virulence, Looking back, it is now sadly clear that property'has been much over~ rated. The meteoric rise in land values was accompanied speculative adventures which, now the depression has come, have brought nemesis in their train, In considering the frozen condition of the market it is impossible to ignore the fact that the speculators—together with dealers operating on normal lines—are unlikely recoup themselves, Many are still holding on to property in the desperate belief that, by some magical turn of the tide, they may somehow recapture the rare and refreshing fruit of the "boom" period. Thereby they fail to grasp the significance of world conditions—so admirably outlined by Mr, Graham Hutton in his article reproduced in these columns. this Wweek—and they are shutting their eyes to the artificial enhancement of values and the consequent impossibility of restoring normality on such a basis, The suggestion that rates of me terest should be eased is made side by side with the plea that forbearance in the treatment of defaulting mortgagors should be extended. Already attention has been forcibly drawn to the fact that legislation, which has gravely pro-Judiced the mortgagee's ability to foreclose, has tended to impair the mortgage deed as an instrument of security. Rates of interest are not arbitrarily fixed. They conform closely to market conditions and to the various political and economic factors affecting the transactions to which they relate. There may be good ground for exercising caution in applying the normal procedure in foreclosing at a time of exceptional stringency, but usually this consideration is fully taken into account as a matter of business prudence. If it be carried to the point of permitting false values to continue an unmerited lease of life, then the prospects of restoring economic soundness are further impaired. The process of recovery must demand an adjustment of values to the actual conditions and the clearing away of deadwood so that basically healthy concerns may have a reasonable chance of recuperation. The spectacle of empty houses, taken in conjunction with the steady reduction of rents, points to the gradual operation of this drastic treatment. Confidence has to be encouraged to assert itself and that can only be achieved by ensure ing the strict relation of values to the prevalent conditions. Ruthlessness, as Mr, Cumine urged, is to be avoided, but unless there is a stronger grasp of realities by mortgagors and others concerned in this problem, it is diMeult to see how the purchase of property can be brought extensively into play for relief of the situation,
Text read from the printed page and cleaned; old type leaves the occasional error.