WITH more and more pressure mounting on the finances run by our civic bosses local councils are continually looking for new ways to fund our vital services.

Axing hundreds of jobs and looking to cut services like rubbish collections while saving money on the social care for some of the most vulnerable in our communities has become very much part of running a local council in the 21st century.

Investing our money in the property market is one of the latest ways finance chiefs are using to help shore up the council bank balance.

Earlier this month the Daily Echo revealed that Fareham council has spent £11m of taxpayers’ money investing in commercial properties on a retail park.

It is expected the buildings - let to Argos and Dunelm - on the Southampton Road Retail Park, Park Gate, will take 14 years to return the investment – generating around £750,000 a year for the council.

Council leader Sean Woodwardinset below, said the authority had to look for new ways of generating money.

He added: “By being creative, we have been able to achieve this despite seeing our government support reduce by over £3m per year, and I’m very pleased to see this property purchase strengthen our portfolio even further.”

Southampton City Council also has joined the charge by hard-pressed British civic chiefs forking out a combined £1bn into buying real estate in a bid to offset crippling central Government funding cuts.

As previously reported in the Echo the city’s bosses are ploughing £65 into creating a multimillion pound property empire as part of a drive for the cash-strapped council to balance its books.

They claim that taking advantage of borrowing money at cheap rates to create an investment portfolio of properties such as retail parks, offices and hotels is a “reliable” way of clawing back millions of pounds lost to austerity.

But how steadfast is it for councils to invest public funds in this way in an increasingly uncertain world?

Critics have hit out at the plans as “property speculation” and warn they could be putting tax payers money at risk.

But councils already investing heavily in real estate say it is an important long-term drive towards local authorities becoming more “self sufficient”.

Southampton City Council is ramping up its property portfolio following its announcement of £42.3m worth of cuts over the next three years.

The cuts - which include more job losses, a rise in council tax and moving more council services online - come after the authority has already slashed £92.4m from its budget in the past five years.

The council is building its investment portfolio by borrowing £65m from the Public Works Loan Board (PWLB) which lends cash to local authorities at rates of around two per cent - compared to private companies borrowing cash at rates of up to five percent.

It has recently secured three properties in combined deals worth £20.1m- with properties both inside and outside of its area.

These include two retail warehouse properties in Southampton on Winchester Road, currently occupied by Wickes and Halfords, and a modern office building in Cambridge with technology giants Nokia and Virgin Media Ltd already in-situ as long-term tenants.

The council is also in talks to secure a deal to buy a hotel in Tewkesbury, Gloucestershire, which it hopes to complete next month.

The remaining cash will be invested into other projects, according to the council.

The authority also generates profit from rents from the tenants.

The property assets tend to yield between 4.5 per cent and 7 per cent, with yields stretching up to near 10 per cent on some warehouse deals, according to experts.

Daily Echo:

PICTURED: Two retail warehouse properties in Southampton on Winchester Road, currently occupied by Wickes and Halfords bought by Southampton City Council

When asked why the authority was not investing more within the city to generate jobs and investment on their doorstep, council leader Councillor Simon Letts, pictured below, said the strategy was designed to diversify the types of assets owned so they were not reliant on a single market and could create a “reliable income stream”.

He added that the already buoyant property market in Southampton made it unnecessary for the council to buy up land to stimulate growth - but that the council already owns parcels of land in WestQuay, High Street, Above Bar and around Southampton Station which it draws income from.

Local authorities have been buying up real estate for years.

Eastleigh Borough Council controversially bought the lease of the 167-acre Rose Bowl site for £6.5m(renamed The Ageas Bowl) in 2011.

A separate plan was also agreed by the council to pay for a £30m luxury hotel at the ground.

Meanwhile Guildford Borough Council has invested millions into real estate in a drive to regenerate the Surrey commuter town and to fund the construction of new council housing.

Deals include purchasing Wey House office block in Guildford for £22.7m last month.

Deputy leader Councillor Matt Furniss, said: “We’ve found it extremely successful and we are already seeing a huge amount on our returns coming from the properties we have invested in. We are careful and prudent to ensure that we know what we are doing and we are in a move towards self sufficiency.”

Authorities buying assets outside of their borders include Portsmouth City Council purchasing the freehold of an £8.5m purpose-built Mercedes garage close to Southampton Airport - the fifth out-of-area property built in nine months as part of a £25m investment plan - ontop of properties in its area/.

At the time the council leader Donna Jones, pictured right, said it had generated £3 million per year - offsetting some council cuts.

Council deputy leader Luke Stubbs said investing out of area can help “spread risk” but added: “We put a great deal of care into locating the best assets at the right price. But the risk of doing nothing is very clear. If we do nothing we will have to take millions out of the budget. It is justified in the circumstances.”

But Southampton City Council independent Redbridge ward representative Councillor Andrew Pope, pictured left, has criticised the trend - claiming the profit margins are not high enough for councils to invest large amounts of money into. He said: “It puts public services at risk. Public services can’t be gambled by property speculation in this way by increased borrowing.”

Conservative MP for Southampton Itchen Royston Smith said that while the principal of investing was a good idea it carries risks and said: “They need to be very cautious. This is not the main function of government. Local government should be governing and providing services.”

Michael Green head of the Southampton branch of property management company Michael Green, said councils are having to become “increasingly entrepreneurial” to secure fresh revenue and avoid deeper cuts.

He said: “Many local authorities are now raising finance and investing in commercial property investments, often outside their administrative boundary. They are also increasingly looking at creative ways of dealing with their own surplus properties.”

“These include setting up special purpose vehicles as a joint venture with the private sector to develop surplus sites and sharing in both the capital return and revenue streams created.

“Other methods include selling off sites to occupiers, but rather than take a payment for the land, they pay the occupier to build out their own unit and then rent it back to them.

“This provides a revenue stream for the Council rather than a one off capital payment.”