Birmingham is known as the UK’s ‘Second City’ due to its rising population, rich history and growing economy. Situated in the heart of England, the city is home to more than 1.1m people
Why invest in Birmingham property?
Birmingham is known as the UK’s ‘Second City’ due to its rising population, rich history and growing economy. Situated in the heart of England, the city is home to more than 1.1m people³, while the greater Birmingham area houses almost 2.5m residents4 , five universities, and a property sector which is in the early stages of a major growth spurt.
Birmingham is the second largest city in the UK, yet it has been overlooked historically by investors in favour of London, Manchester and Liverpool. However, all the fundamentals are in place to make Birmingham an attractive investment option for anyone seeking to make market-beating returns over the short, medium and long term.
A survey by PWC and Demos that looked at factors such as transport, work-life balance, inequality and health, found that Birmingham is the fastest improving place in the country to live and work5. Meanwhile, the Ladywood area6 of the city recorded the UK’s highest growth in property prices last year, and the city’s house prices even outstripped those in London.
The imminent arrival of the HS2 rail link, a thriving student population and a string of government incentives have combined to make Birmingham a particularly promising option for property investors. Recent research has found that the average rental yields for Birmingham-based homes range from 5.95% to a massive 10.87%7, depending on the size and location of the property. Even at the lower end of the market, this easily exceeds the average UK rental yield of 4.4%8.
And, with a host of new expansion plans and investment opportunities already in the works, the city is starting to grab the attention of income-seeking investors from around the UK.
Regional Economy – The Midlands Engine
The Midlands economy is already worth more than £217bn9, but there is still plenty of room for growth.
Following the success of the Northern Powerhouse scheme, the UK government has launched the ‘Midlands Engine’ plan as a way of stimulating economic growth in the East and West Midlands. Moreover, as the largest city in the Midlands, Birmingham is perfectly placed to take advantage of these new opportunities. Over the next 15 years, the government plans to create 300,000 new jobs and £34bn worth of growth in the area, by supporting businesses and innovation10.
Birmingham City Council has also announced its own 20-year ‘Big City Plan’, which it has described as “a vision to encourage and support Birmingham’s continuing transformation into a world-class city centre.”
Birmingham is cosmopolitan, dynamic and accessible from just about anywhere in the UK”.
Matthew Woods, Captec Wealth Group
Reshaping the infrastructure
Fundamental to the Big City Plan has been New Street Station, reopened in 2015 after a £600 million redevelopment. Not only is it a crucial node in the national rail network, it is that system’s current gateway to the Midlands.
The rebuilt station also connects with West Midlands Metro, an existing tram service covering Birmingham and its environs, notably, Wolverhampton, but other regional centres as well. Opened in 1999, it is being expanded from 26 to 35 destinations, most importantly including the airport.
With flights to some 100 international destinations, Birmingham Airport has the UK’s only direct service to China outside London. It also has direct services to New York. Over £500 million has been invested in an extended runway, modernised baggage facilities, improved road access, and better public transport services.
Transport – HS2 and Beyond
Already, Birmingham is one of the best-connected cities in the UK. Birmingham New Street is the busiest train station in the UK outside of London11 and a major hub for the UK train system. Commuters and professionals can travel from Birmingham to London, Liverpool or Manchester in less than 90 minutes. Cardiff and Swansea are just over two hours by train, while Glasgow and Edinburgh are four hours by rail.
In addition, the city centre-adjacent Birmingham Airport offers flights across Europe, while the nearby East Midlands Airport services several international flights.
However, the arrival of HS2 is set to transform the city’s transport infrastructure. Phase one of the HS2 plan will install a high-speed rail link between Birmingham and London, with an expected journey time of just 49 minutes. Considering that the typical London commute takes around 45 minutes, this is likely to attract a swathe of commuters to the city – particularly around the Curzon Street area where the HS2 terminus is set to be based. The first phase of HS2 is due for completion in 2026, with work on the tracks due to begin in 2019.
Forecast for Growth
Birmingham is behind the curve with its regeneration, presenting huge opportunities for investors seeking healthy returns.
The 20-year Big City Plan aims to improve transport connectivity, as well as building 5,000 new homes and creating 50,000 new jobs12. The arrival of the HS2 link will also attract increasing numbers of Londoners to Birmingham, where property prices are much more competitive.
Leisure – The Commonwealth Games and More
Birmingham is already a British centre of culture and sport. It is home to two of the country’s oldest professional football teams – Aston Villa FC and Birmingham City FC – and will soon expand on its sporting prowess as the host of the 2022 Commonwealth Games. Ahead of the Games, the city’s Alexander Stadium is being renovated to extend its capacity to 50,000 seats. It has been estimated that the Games will generate a £526m boost to the West Midlands regional economy13.
“The growth potential is enormous – even without accounting for the new opportunities which HS2 will bring.”
Matthew Woods, Captec Wealth Group
Schools – A Modern University City
With the University of Birmingham, Birmingham City University, Aston University, University College Birmingham and Newman University, Birmingham is a university city five times over. More than 75,000 students live in the city during term time14, and many choose to stay on after their studies to pursue work nearby.
Purpose-built student accommodation has been rising steadily in the city, but according to Cushman & Wakefield’s UK Student Accommodation Report15, there are just 21,768 bed spaces16 for the 2017/2018 academic year, which highlights the pressing need for more landlord-owned properties in student areas.
Investments – A Window of Opportunity
For new and veteran property investors, there is no shortage of opportunities in Birmingham
The city is well known as an affordable place to live for students, young professionals and families, but there are signs that this is changing.
In Ladywood, house prices rose by an extraordinary 17% between July 2016 and July 2017, due to an influx of young professionals from other parts of the country17. In fact, in August 2017 it was revealed that net migration from London had exceeded migration into the city, with a lot of former London-dwellers choosing to relocate to the Second City instead.
However, despite its growing popularity, Birmingham is still one of the most affordable cities in the UK for first-time buyers and buy- to-let investors. While the average UK property costs £210,40118, the average asking price for a Birmingham-based property is just over £150,00019. According to Hometrack UK, property price growth is even outpacing London – year-on-year house price growth in Birmingham stood at 7.3% in January 2018, while London property prices grew by just 1.6% over the same period20.