Property Investment in Birmingham
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Birmingham is one of Britain’s most popular and rewarding buy-to-let property investment markets. Some key reasons for that include its large, fast-growing population, a buoyant economy and large sums of inward investment that are fuelling job creation and transformative urban regeneration schemes.
Here, in this guide, we’ll examine these and other factors in more detail, and consider why many industry commentators regard Birmingham as the single most attractive property investment destinations in the country.
Why Invest in Birmingham? A Summary
For several years now, numerous commentators have declared Birmingham to be the UK’s best performing property investment market. To support their arguments, they cite some of the city’s most notable strengths.
One of the UK’s fastest-growing populations outside London
A huge shortfall in housing supply
More foreign direct investment than anywhere outside London
The UK’s second-highest capital growth rate in 2022
Average annual price growth of +7.4% (source: Zoopla, March 2023)
Price growth of +8.9% growth predicted by 2027 (source: Savills)
Affordable property prices
Strong rental yields
An 80,000-strong university student population
Massive inward investment and urban regeneration
Poised to benefit from HS2 rail links
Thousands of new jobs being created
11% employment growth since 2010
Major regeneration projects prompted by the 2022 Commonwealth Games
Birmingham’s Population
For investors, this is all excellent news. Job creation on this scale will inevitably attract more people to the area, and this in a city that already boasts a population of 1.2 million people.
What’s more, Birmingham has a comparatively young population. By some measures, it has the youngest population in Europe, with 40% of its population aged under 25. Partly, this is due to the natural expansion of its home-grown populace, and partly it is accounted for by its large student body. But another big factor is inward migration from London. This phenomenon has been a subject of considerable interest to journalists and industry commentators since at least 2018, when people began to see a marked change in young workers’ movements. However, the trend accelerated in 2020 and 2021 with the advent of the Covid pandemic.
Faced with hugely over-inflated property prices in central London and very high living costs, many young professionals and recent graduates began to question whether they could achieve a higher standard of living elsewhere. For generations, London had been the focus of a national ‘talent drain’, drawing some of the country’s best and brightest away from other parts of the country. However, that trend has seen something of a reverse in recent years, and Birmingham has been a big beneficiary of that.
Job prospects in Birmingham are excellent and yet rental costs are substantially lower than in London, so for many people, Birmingham wins on both counts. In 2018 alone, nearly 8,000 workers made the move from London to Birmingham in search of better standards of living.
In a similar vein, Birmingham is now retaining a large proportion of its graduate population. According to Savills, the city produces 25,000 graduates per annum and almost exactly half of them choose to stay, live and work in Birmingham.
Many of the same factors that make the city appealing to property investors also make it attractive to blue-chip employers and foreign commercial investors. As a result, Birmingham has seen a large, steady influx of new money and job creation by such organisations as BT, HSBC, Barclays, PwC and others.
To put some numbers to that:
HSBC has created 2,000 new jobs since 2020
BT is creating 4,000 new jobs through its move to Three Snowhill, a new 17-storey office development.
The accounting firm PwC recently relocated to One Chamberlain Square, bringing with it 2,000 members of staff and creating over a thousand new jobs.
Between 2019-2021, those three firms alone added well over 9,000 new jobs in the city, but growth is actually much more widespread. HS2 Ltd has created 7,000 new jobs in Birmingham and more can be expected between now and 2026.
Additionally, at the other end of the scale, new start-up businesses are also driving employment and economic growth. In 2019, Seven Capital reported that “the number of start-ups recorded in Birmingham sat at around 18,000 … and (this) has incrementally increased since 2016. In the same time period, the number of active businesses in the area has increased three times faster than the UK average.” In absolute terms, Birmingham has witnessed the birth of almost 2,000 new enterprises – a rise of 4.8%.
In all, the Big City Plan for Birmingham envisages the creation of 50,000 new jobs by 2030; an ambitious target but one that is looking increasingly realistic.
There is no doubting Birmingham’s appeal to commercial investors and the region’s economic development teams have been keen to build on this success. The city is now witnessing a host of important new regeneration projects and infrastructure investments, together with improvements to Birmingham Airport.
HS2
The growth of Birmingham’s population is likely to be further accelerated by the advent of HS2, which will connect directly to Birmingham. The new high-speed link will put Birmingham within a 45-minute commute of central London, so rather than being perceived as an alternative centre of employment, the city might also soon be regarded as an attractive commuter city for London. Since property here costs a fraction of what it does in the capital, and since the cost of living is also much more reasonable, Birmingham could easily witness a further influx – but this time from people earning London-weighted salaries. The implications for demand for property and rentals are both obvious and exciting.
Housing Supply
As an already densely-populated city, Birmingham is characterised by intense competition for residential property – and particularly property in convenient central locations close to amenities, new development zones and city’s the biggest employers.
According to a JLL report in 2020, Birmingham requires around 4,000 new homes a year to keep pace with growing demand, but construction rates have averaged closer to just 900 per annum since 2010. At about the same time, Knight Frank estimated that Birmingham would need between 12,000 and 18,000 new homes by 2025.
In November 2021, the Birmingham Mail featured a report by the charity Shelter, which found that 12,121 people were living in temporary accommodation, equivalent to 1 in every 94 residents. It reported on the “desperate shortage of social homes” noting that 14,200 households were on the social housing waiting list in Birmingham, “yet just 760 social homes have been built in the city since 2015.”
New mixed-use developments are springing up around Birmingham and these will include a residential element, but the sheer scale of this chronic under-supply of housing suggests that the imbalance won’t be corrected any time soon. And until it does, simple economic rules of supply and demand suggest that investors with suitable rental property should be able to count on healthy and sustainable yields.
Inward Investment in Birmingham
Often regarded as England’s second city, Birmingham has long been home to some of the country’s biggest employers. Notably, it is the UK's second biggest commercial and financial centre after London. It hosts organisations such as PwC, Deutsche Bank, KPMG, HSBC and Allianz, and as such, it represents one of the largest clusters of business, professional and financial services companies anywhere in Europe.
To capitalise on this status, developers and public bodies have created a wealth of grade A office space in prestigious, newly regenerated districts. Examples include:
Paradise: a £700 million city centre development that will create 1.8 million sq. ft. of mixed-use office, retail and leisure space. Phase one completed in 2020. Work on phase 3 is expected to finish in 2025 and, upon completion, the site will support hundreds of new jobs. The scheme encompasses prestigious individual construction projects such as Two Chamberlain Square, which was finished in 2019, and One Centenary Way, which was finished in 2023. Three Centenary Way began in the same year and is due for completion in 2025.
Arena Central: another city-centre mixed-use development with a gross development value of £530 million. The scheme is creating over 1 million sq ft of space for offices and a 250-bedroom hotel, and giving rise to impressive new buildings such as 1 Centenary Square and 3 Arena Central, both of which are currently under construction.
Eastside Locks: a £450 million canalside regeneration scheme, delivering improvements to the public realm and creating a hotel, shops, bars and restaurants. Projects include a £200 million, 37-storey development that will provide residential space together with nearly 20,000 sq ft of space for shops, bars and cafés.
Birmingham Smithfield: a £1.9 billion scheme to regenerate large parts of Eastside and the city’s central shopping area. Upon completion, it is expected to generate around 3,000 new jobs close to the city’s Bullring and New Street Station. Construction work will occur in phases, and with the first developments completing in 2025.
House of Fraser redevelopment: a £110 million scheme to revitalise one of the city’s best-known buildings. It is designed to create an important new retail destination in Birmingham and to support the creation of 2,000 new jobs. The scheme will create a mix of office, retail and catering space.
103 Colmore Row Tower: conceived as Birmingham’s tallest office block, and completed in 2021, the 26-storey structure now dominates the city’s central skyline. It stands as the UK’s highest new office building outside London. It has created 230,084 sq ft of Grade A office space and boasts its own roof terrace and top floor restaurant. Over a dozen tenants have already moved in.
Media Village: work began in 2000 on a new £500 million film and media studio in the Digbeth area, known as Mercian Studios.
Foreign direct investment has also been buoyant. In 2022, Invest West Midlands reported that “during 2021/22, five FDI projects landed in the city’s ever-growing £6.2bn BPFS sector. In that same time, there were also nine projects established in its £1.6bn ITEC sector and numerous other projects in its £2.3bn manufacturing and £8.4bn public sectors. Overall, Birmingham led the West Midlands region to create more jobs through FDI projects than any other region outside London.”
With these and many other developments taking place across the city, it’s clear that Birmingham’s fortunes are rising. As a result, investors can look forward to seeing growth in jobs, in the economy and in Birmingham’s population. In turn, these should drive strong rental demand, rising yields and good prospects for strong capital appreciation.
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