THE FIFTH TABLE OF COMPOUND INTEREST — continued.

The Annuity which One Pound will purchase for any Number of Years to come, &c.

TABLE VI. Showing the Value of an Annuity on one Life according to the Probabilities of Life in London.

TABLE VII., showing the Value of an Annuity on the joint Continuance of two Lives, according to the Probabilities of Life in London.

Age of the

Value at

Age of the

Value at

Younger. Elder. 3 per Cent. 4 per Cent. 5 per Cent. Younger. Elder. 3 per Cent. 4 per Cent. 5 per Cent.

TABLE VIII., showing the Value of an Annuity on the longest of two Lives.

Age of the

Value at

Age of the

Value at

Younger. Elder. 3 per Cent. 4 per Cent. 5 per Cent. Younger. Elder. 3 per Cent. 4 per Cent. 5 per Cent.

The valuations in which the architect is consulted are properly only those wherein buildings have been or may be erected; from which if he wander, the probability is that he will create difficulty for himself, tending to exhibit him as a pretender to knowledge not within the regular course of his occupation. The general principles, therefore, on which we propose to touch, are confined to the species of property above named, as distinguished from that in which the resident valuator near the spot in the different provinces is the best adviser, from the local knowledge he possesses. The auctioneers who with unblushing effrontery pretend to a knowledge of the value of property in the metropolis, are utterly incompetent to the duties they undertake, from an ignorance of the durability and cost of buildings, which can be attained by the practice and experience of the architect only.

Buildings may be so disadvantageously placed on their sites as to realise nothing like a proper interest on the money expended in their erection; and, indeed, so as altogether to destroy even the great value of the ground on which they are built. Thus, to place before the reader extreme cases, which generally best illustrate a subject, let him suppose a row of hovels built in Piccadilly, and a house like Apsley House placed in Wapping High Street. In both cases the productive value of the ground is destroyed, there being no inhabitants for such dwellings in the respective quarters of the town. From this it must be evident that the value of town or city property, which consists principally of buildings, is divisible into two parts; namely, —

That arising from the value of the soil or site; and

That which arises from the value of the buildings placed upon it.

We will suppose for a house which is fairly let at a rent of 100% per annum, no matter what the situation of it be, that it could be built for 10004., and that the proprietor or builder would be content with 7 per cent. for the outlay of his money, a rate by no means larger than he would be entitled to claim, seeing that the letting, after it is built, is a matter of speculation, and that loss of tenants and other casualties may temporarily deprive him of the interest of his capital. In this case, then, the rent of the mere building would be 70%.; and as the full rent assumed is 100l.,

100-70=30, which is manifestly the value of the ground or ground rent.

Thus in the cases of valuation of freeholds, wherein the gross rent can be accurately ascertained, there can be no difficulty in coming at the real value of the ground rent, because the building rent, or that arising from the expenditure of money on the soil, can be immediately ascertained by the architect, with the rate of interest on it which it is fit the builder should have. The remainder of the rent is that inseparably attached to the value of the soil, and belongs to the ground landlord.

The reason for thus separating the two rents is this: the ground rent, attached as it is to the soil, is imperishable. It is true that the value of ground is constantly fluetuating from the power of fashion over certain localities; but with this the valuator cannot deal. The changes are slow; and the Lord Shaftesbury in the time of Charles II. would have little thought it possible, when he placed his residence in Aldersgate Street, that his successors would have dwelt in a house in Grosvenor Square; neither, even five and twenty years ago, did it cross the mind of the then possessor of the Grosvenor property that the Five Fields at Chelsea contained a mine of wealth in the ground rents of Belgrave and Eaton Squares. Such are the mutations of property, with which the present question is not involved, unless the gift of foresight, in a degree not to be expected, be given to the valuator. The other portion of the value of house property is strictly the result of the perishable part of it, namely, the building itself; and this is limited by the durability of the building, which has great relation to the time it has already existed, and to the substantiality with which it has been constructed. The durability, then, or the number of years a building will continue to realise the rent, is the second ingredient in a valuation, and is a point upon which none but an experienced person can properly decide.

The rate of interest which the buyer is content to obtain in the investment of his money in buildings, or, in other words, in the purchase of the perishable annuity arising from the building, will necessarily vary with the value of money in the market. In the compensation cases under public improvements, wherein it is obligatory on the owner to part with his property, the 5 per cent. rate of the table is generally used, by which the buyer makes too little interest on the perishable part of the property. Few would be inclined to invest money in such property at so low a rate, for a rent which every year, from wear and tear, becomes less valuable. Individuals understanding the subject would scarcely be found to purchase, unless they could make at least 7 per cent. for this part of the capital. In the cases above mentioned, twenty-five years' purchase, that is, 4 per cent., is the usual price at which the ground rent is taken.