Why is Birmingham on property investors’ radar?

You may have heard of friends, family, clients or contacts investing in property in Birmingham. We take a closer look at the UK’s second city and pick out some of the key fundamentals that investors have pounced upon recently.

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#1 Outperforming Market

Birmingham has one of the UK’s largest economies, a fast-growing population and a strong pipeline of new development. Bars and restaurants are popping up, while recent regeneration is underpinning a bright outlook for this UK powerhouse city. Large-scale regeneration and development have contributed to outperformance in the city’s property market, with the annual growth rate for residential values averaging between 5% and 10% since mid-2015, according to data from the Office of National Statistics (ONS).

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The strong growth rate in prices seen in the past few years has contributed to a 45% rise in average residential property values since the post-crisis trough in 2009. Even with this level of growth, the average price in Birmingham is still notably lower than the UK average. This price differential underlines just one of the key drivers of the Birmingham market – its relative affordability compared to other areas of the UK, especially those in the south of England.

As the UK’s second-biggest business hub, Birmingham draws comparison with London, the financial centre of Europe. However, when looking at residential property prices, the difference is striking, with new build development prices in some central zones of London ranging from £1,000 to £2,000+ per sq ft, compared to around £300 to £450 per sq ft in central Birmingham. The city’s affordability dovetails with improvements in amenity and lifestyle, making it a destination for young workers and families alike.

#2 Economic Outperformance

Birmingham has benefited from a fast-growing local economy as well as large-scale city centre regeneration which is helping fuel population growth. Economic expansion is forecasted to continue and is set to outperform the wider West Midlands during the next decade, according to Experian. Birmingham’s gross value added (GVA), a measure of the value of goods and services produced in an area, is set to climb 25.5% by 2028, faster than all other local authorities in the region.

Meanwhile, in December 2017, the city was announced as the new host for the 2022 Commonwealth Games, a move that will potentially bring further economic benefits.

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#3 Steady increase in residential demand

The number of people living in Birmingham will rise by 171,000 to 1.3 million by 2039, according to the latest official population projections. This translates to nearly 100,000 additional households being created over the next two decades or so.

The £600 million redevelopment of New Street Station, £200 million expansion of Birmingham International Airport and the launch of the forthcoming High-Speed railway to London (HS2) makes Birmingham the most attractive regional city for major firms relocating.

The city centre is already home to global businesses such as HSBC, Deutsche Bank, Deloitte and PwC. The wider urban area attracts a diverse range of employers – from hundreds of tech-based start-ups to major businesses such as Kraft, Amey and Jaguar Land Rover.

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A city with one of the youngest populations in Europe with an estimated 45% of the residents under 30, Birmingham offers a thriving rental market for investors.

#4 Promising city pipeline and development

Housing delivery data suggests that there is an imbalance between the supply of new homes and demand for housing in Birmingham. Some 1,751 net additional dwellings were delivered in 2016-2017, down from 2,839 the previous year, according to data from MHCLG. Birmingham needs 3,577 additional dwellings every year until 2026 in order to meet demand and clear the backlog, according to official estimates.

Looking to the future, the most recent planning data suggests that around 9,700 private residential units are in the development pipeline – either under construction or with planning granted, according to data from construction intelligence provider Glenigan. This includes projects comprising just over 5,300 units that are currently active on site. However, it is important to note that not all schemes with planning will come to fruition, and some larger schemes may take many years to complete.

#5 Booming rental market

Asking rents for a 2-bed flat across the city averaged at £860 per calendar month in Q1 2018, up from £750 during Q1 2015, according to data from Rightmove. The rental market is supported by demand from students studying at the city’s numerous universities. Birmingham University was recently named as the 15th best in the country in The Times Good University Guide 2018.

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Birmingham is also well-placed to attract and retain graduate talent. According to an analysis of HESA data by the Centre for Cities, 49% of new UK domiciled graduates who were in employment six months after graduation stayed in the city to work in 2014 and 2015. Not to mention, Birmingham is also the third best performing city in the UK for attracting graduates who have no prior links to the city, helping drive further demand for rental accommodation.

#6 Right products continue to sell well 

The number of home sales taking place in the city has dipped over the last year, reflecting a wider trend as ‘churn’ in the second-hand housing market has fallen, with less movement up and down the housing ladder. However, overall activity in the residential market in Birmingham remains well above the levels seen in the four years after the financial crisis and new-build apartments with high-end finishes and plentiful amenities catering to the latest needs and requirement trends of residents continue to perform very well.

© Snowhill Wharf, Birmingham

#7 Transport infrastructure upgrades

Given the uplift in job creation and amenity in the city centre, the demand to live in Birmingham is expected to continue to grow. The improvement of transport infrastructure, both within the city and between Birmingham and other key UK cities, is likely to further augment this trend. The arrival of HS2 will have a transformational impact on the city and wider region – accelerating regeneration, growth, creating jobs and driving economic prosperity.

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With HS2, the journey time between London and Birmingham will be cut from 1 hour 24 minutes to just 49 minutes complementing the already well-connected Birmingham International Airport where 50 airlines fly to 150 destinations.

To explore residential investment opportunities at Birmingham’s Snow Hill Wharf by the UK’s top developer Berkeley Group, read more here or connect with Dominic Heaton-Watson, Associate Director, International Project Marketing, Knight Frank Malaysia at dominic.hw@my.knightfrank.com or +60104389169.

Edited by Reena Kaur Bhatt

 

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