Investment in Birmingham

In their recently published research paper into the residential property market in Birmingham and the surrounding area, the estate agency Knight Frank highlight both a recent strength in the market and the potential for further growth to come.

Their paper confirms that in the period since 2015, the annual growth rate of between 5% and 10% made Birmingham one of the best performing cities in England in terms of house price growth, comfortably outstripping London.

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 financial crash and subsequent house price trough in 2009. Even with this level of growth, the average price in Greater Birmingham is around £178,000, significantly lower than the UK average of £226,756.

There are several drivers that make Birmingham an attractive area for investment.

1. The price differential makes it relatively affordable compared to other markets in the UK, especially those in the South of England. Birmingham is the UK’s second-biggest business hub, but when compared to London (the UK’s number 1) there is a striking difference in residential property prices, with newbuild development prices in some central zones of the capital ranging from £1,000 to £2,000+ per sq. ft, compared to around £300 to £450 per sq. ft in central Birmingham.

2. Improvement in amenity and lifestyle in the city are making it a destination for young workers and families alike. Birmingham was the most popular city destination for those migrating from London in 2016, ahead of cities such as Manchester, Leeds and Bristol. Many students are attracted to the city due to its high-quality universities, and many then stay to make their living here. A significant number of movers are also young workers and families.

3. The city is receiving billions of pounds of infrastructure investment, with new tram lines, office blocks and public squares planned as the city centre is remodelled. Two High Speed 2 (HS2) railway stations are being built in central Birmingham and nearby Solihull, which will dramatically cut journey times to and from the capital.

4. News that Birmingham has been selected as a host city partner of the 2022 Commonwealth Games is likely to bring further economic and social benefits. In addition HSBC is establishing a retail headquarters in Birmingham while Deutsche Bank already has a trading floor and back office jobs in the city. HMRC has announced plans to move a large number of staff to the city centre from 2020.

5. Schooling remains an important factor for buyers, with the top quality schools in and around Birmingham continuing to act as a draw. Larger, detached properties in Solihull, Edgbaston or Sutton Coldfield, for example, are perennially in demand among buyers with young families.

6. A growing population, improved transport and a step-change in amenity, career opportunities and lifestyle underpin the demand for homes in and around Birmingham. 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 into nearly 100,000 additional households being created over the next two decades or so.

Future Growth

Knight Frank are forecasting price growth of 4.5% in Birmingham in 2018, with a similar level of growth next year. Cumulative price growth from the start of 2018 to the end of 2020 is expected to be around 14%.

They report that the city centre market has been especially busy over the last 12 months, supported by the volume of high-quality new development currently taking place.

The surrounding towns and villages, including Sutton Coldfield, Solihull and Edgbaston, continue to attract young families and professionals looking to move up the housing ladder in search of more space. An increasing number of vendors have been selling in these locations and looking to downsize either within the local area, or into Birmingham city centre.

Knight Frank expect the strong confidence among local buyers and vendors to continue despite the wider uncertainty in the market, due to Brexit and the possible negative impact on the economy.

Please contact us for further information about investment opportunities in the area at tom@sourceinvestments.com