An estate agency says property investors should not be deterred by news that Birmingham council - Europe’s largest local authority - is effectively bankrupt.
Last week Birmingham declared that it was effectively bankrupt, with legal requirements to provide statutory services to residents preventing the declaration of official bankruptcy. It’s thought that 20 other councils could be at risk of following in the path of Britain’s second city, which could spell misery for many more who may be impacted.
However, planning and housing services is one of the statutory services earmarked by Birmingham council which is, at least, promising for those reliant on help with housing.
The Barrows and Forrester agency analysed the annual rate of house prices across five other councils to have previously declared effective bankruptcy and how they performed in the year that followed the declaration.
However, the market analysis by Barrows and Forrester across Northamptonshire, Hackney, Thurrock, Croydon and Slough councils found that house prices increased at an average rate of 3.2 per cent in the year that followed effective bankruptcy.
Hackney saw the strongest performance in this respect - up 13.6 per cent in the 12 months that followed.
A year after Slough did the same in July 2021 house prices increased by 8.7 per cent, with Northamptonshire house prices seeing a 2.3 per cent increase a year after its council declaring effective bankruptcy in February 2018.
Managing director of Barrows and Forrester, James Forrester, comments: “Birmingham has been going from strength to strength in recent years and, as a result, we’ve seen high levels of demand for housing and an above average level of house price growth over the last year alone.
“So news that Birmingham City Council is effectively bankrupt will have brought a great deal of concern to those within the local housing market. The bad news is that cuts will be made and this is likely to impact some local services, infrastructures and the city as a whole, which could reduce property market demand, especially from working professionals.
“The good news is that Bricks and mortar is incredibly resilient and the Birmingham property market has weathered far worse in recent times, from Brexit, to the pandemic and the current economic landscape. What’s more, our research shows that effective council bankruptcy has little to no effect on the residential market.”