Spelthorne Borough Council has borrowed £1bn in just two years in order to invest in the property market.
According to a local press report the council has invested in ten commercial developments, including £360m on Sunbury Business Park, offices in Reading, Uxbridge and Slough for £285m, plus a number of residential investments.
It is reported that the council has borrowed money from the Public Works Loan Board, a statutory body which lends money from the National Loans Fund to local authorities on preferential terms.
Local councillors have expressed concern at the risks to the Spelthorne, Surrey, council and local council tax payers should there be a downturn in the commercial property market.
However, the council has said that the investments have been fully thought through and are for the long term, commenting: “We are investing on a long term basis and we fully expect to hold these assets through a number of economic cycles. We have made allowances for things such as refurbishment costs and void periods and we are building up sinking funds to ensure the money is there when we need it.”
Although Spelthorne’s property portfolio is substantial it is by no means unique. A number of local authorities are making property investments now, ostensibly to provide an income in times when government funding is restricted. So private investors need to bear in mind that councils are a not insignificant, well-funded player in the property market right now – not only as competitors when buying and selling property but also as landlords.