How will Birmingham's housing market be impacted by council bankruptcy?

Last week, Birmingham City Council declared that it was effectively bankrupt and while this may spell trouble for some council services, it’s unlikely to phase a housing market that has performed strongly over the last year, according to new insight from Barrows and Forrester.

Related topics:  Finance,  Property,  Housing Market,  Birmingham
Property | Reporter
12th September 2023
Birmingham 771

Barrows and Forrester analysed the annual rate of house prices across five councils to have previously declared effective bankruptcy and how they performed in the year that followed the declaration.

Last week Birmingham City Council 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 are one of the statutory services earmarked by Birmingham City Council which is, at least, promising for those reliant on help with housing.

The research from Barrows and Forrester also suggests that the wider residential housing market could also continue undeterred by this turn of events, based on the performance of housing markets where councils have previously declared effective bankruptcy.

A further six councils have previously been declared effectively bankrupt, with Woking doing so as recently as June of this year.

However, the market analysis by Barrows and Forrester shows that across the other five - Northamptonshire Council, Hackney Council, Thurrock Council, Croydon Council and Slough Council - house prices increased at an average rate of 3.2% in the year that followed effective bankruptcy.

Hackney saw the strongest performance in this respect. Following Hackney Council’s declaration of effective bankruptcy in October 2000, house prices rocketed by 13.6% in the 12 months that followed.

A year after Slough Council did the same in July 2021, house prices increased by 8.7%, with Northamptonshire house prices seeing a 2.3% increase a year after its council declared effective bankruptcy in February 2018.

However, council bankruptcy isn’t the unexpected silver bullet for guaranteed house price growth. A year on from Thurrock Council’s declaration house prices in the area had fallen by -4%, with Croydon house prices following suit at the end of last year (Nov 2022), falling by -4.5%.

James Forrester, Managing Director of Barrows and Forrester, commented: “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 are 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.

"We’re proud people in the Midlands and we’ll rally around our city regardless of what may come and while there is certainly a tricky period ahead, we don’t foresee any notable damage to the local housing market.”

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