Council bankruptcies - effect on house prices and further austerity?

[whyisitallsohard]

I'm currently a buyer, looking for a family home in one or two of the areas the media have highlighted as having bankrupt councils!

I want to make an offer on a house but I've been reading how council tax will be going UP in these areas (likely considerably) all while there will be CUTS to the local area affecting all residents.

I feel that the house price should be considerably less now because it's being effected in this way. I'm not just buying a house, I'm paying for the area it sits in and schools. tbh these council bankruptcies sounds like more austerity to come and will make the area worse over the years... thereby affecting the home values... and therefore me should I need to sell down the line.

I'm really worried about making a bad or poor move/financial decision on this house. I worry about the short and long term future and the effect it will have on me and my family.

What are other buyers' thoughts? What do you think it the right balance?

I'd love to read what you might do as my instincts are saying I should make a much lower offer on the house, especially as there are concerns there will be a housing crash soon ish.

For me the decision would come from what my family situation was and which services I was likely to need. For example, libraries and leisure facilities like public pools/gyms are often early casualties of major council cuts when they need to get money back. If you're not much of a reader, or if you have a private gym membership at a gym with a pool, these would probably not affect you.

In my situation, with young children who have swimming lessons at the local public pool and go to rhyme time every week at the libarary, these sort of cuts would make me consider whether another area might suit us better. I also get mad about cuts to bin collection, coming from a country where you pay for your bins to be emptied and you can empty them as much or as little as you like as long as you pay each time.

I'd also resent paying more council tax for fewer services tbh. Council tax in my area is already extremely expensive because they've done the banding one level down from anywhere else I've ever lived for the same size of property.

If you don't have a choice about where to live, a lower offer might be prudent but other people might value the current situation in the area differently (and the owners might see it differently too) and you might not get the house at the lower offer price.

You’re free to offer what you want but nobody is under any obligation to accept. The possibility that prices might drop and that council tax might go up aren’t persuasive reasons for a ‘much’ lower offer to me. Council tax increase is capped and nobody knows what will happen to prices. It’s the price today that’s important

@monpetitlapin these are excellent points and agree totally about bins. when i was at uni, the local council (take a guess where) had bin emptying strikes for almost two months, it was disgusting and there were rats and other vermin everywhere. i am really worried about these areas we like "now", but will quickly deteriorate over time. i want the same for my children - swimming lessons, facilities, parks and libraries etc.

@BungleandGeorge thanks for responding! i agree in part with what you're saying but when you say "It’s the price today that’s important", surely this also factors in the local area and cuts happening now. If councils today are experiencing cuts and bankruptcies, then you might be proving my point and concerns... house prices should be lower now, from today in those affected areas.

If they are not lower I think that answer your question

You think they should but most people don't

If you moved my current rental house to Croydon, their increase this year (15%) would have taken my council tax from £221 a month to more than £670 a month. And as others say, for minimal services.

I couldn't imagine how I would go about getting a future buyer to stomach that. So I wouldn't even buy.

The politics around how they got special permission for these rises was really pathetic iirc. Goodness knows what they might whack on homeowners in future years.

Looks as though Brum is about to go the same way :(

@KievLoverTwo thanks for sharing this.

it's exactly the point I'm making. this "sellers aren't responsible for council tax" is not a good argument at all.

when anyone buys (or rents as in your example) they are paying for the area too. that's why some places are more expensive than others - you're paying for the area the house sits in. that's why estate agents harp on about the property being near a station, or shopping areas, or good schools.

so, if there are LESS facilities and major cuts in an area, that means the house is worth less, surely??

why should buyers be expected to pay more on a house while the area is deteriorating AND they will be coughing up more £council tax for less in the long run.

it affects the value of the house now and in the future.

@whyisitallsohard

Then don't buy there.

I believe Westminster council is cheap, but house prices are horrendous.

Urgh. My maths above is spectacularly bad. I am having such a bad brain fog day. I just looked at my band in Croydon, it was already £200 more than I pay. Theirs went up 13.9% from 2,839.29 to 3,234.92 between 2023 and 24. A £400 rise is not insignificant though.

Looks like there might be more of this to come.

https://www.theguardian.com/society/2023/sep/11/more-english-councils-expected-to-fail-owing-billions-warns-moodys

@whyisitallsohard I think you are (well) ahead of the curve on this.
‘Location! Location! Location!’ has always been the cry. However if that locations council doesn’t have swimming pools, libraries, weekly rubbish collections, social workers, graffiti cleaners, maintained parks, swept streets, leisure centers, sports fields, and a huge raft of social services, then it will become less desirable than a location with a well run council.
However this is a new phenomenon, and the impact of bankrupt councils is yet to be seen on local services.
It will become a more prominent decision maker and will impact prices. That day hasn’t arrived yet though.

But it evens out in the long run.

Our council isn't bankrupt but the cost of a session's swimming is now £10, up from £7.20. Green bin collection for the year is £180. School bus charges are up to £600 from £500. Libraries, outside of the main central one, are now run by charitable trusts and staffed by volunteers.

So it seems you choose an area where you either pay for a private swimming pool because the council one is shut, or you pay higher entry prices anyway.

In the end, salaries & pensions are up, and they have to be paid for. There's no escaping it.

CT increases are only going to get worse due to ageing population & social care funding. Not sure what the solution is, chose a younger area? more dense?

If you moved my current rental house to Croydon, their increase this year (15%) would have taken my council tax from £221 a month to more than £670 a month. And as others say, for minimal services.

It's crazy

And if you have kids or are going to have them chose carefully as school rolls are falling.

It will become a more prominent decision maker and will impact prices. That day hasn’t arrived yet though.

that's true