Birmingham is one of the best hotspots for property investment within the UK at present.

According to the Emerging Trends in Real Estate 2016 report by PwC and the Urban Land Institute, London has lost its place in the ranking of the top 10 best cities for investment prospects for the first time since 2012, down to 15th place – and Birmingham has taken its place.

In this report, I take a look at some of the most important aspects about the city that any investor should be researching. In fact, many of the criteria on which Birmingham excels are useful for first-time investors trying to evaluate the value of any prospective buy-to-let residential area.

Fundamentals

Birmingham is important as a property investment location due to underlying economic fundamentals.

It has excellent transport connectivity, and sits in the middle of a national road and rail network within four hours os 90% of the UK’s population and businesses. Investment in its transport infrastructure has been solid, and the upcoming HS2 line will link Birmingham directly with London, cutting journey times to London to 49 minutes. With super high-speed broadband, this makes Birmingham a very attractive place to establish a business hub.

It has the largest city economy in the UK outside of London. The financial and professional services sector is the largest in terms of economic output, contributing a third of the city’s Gross Value Added (GVA). Economic output in the city is forecast to grow by around 2.5% between 2015-30. As testament to this, recent relocations to the city include HSBC, the BBC and Google.

The demographic fundamentals of Birmingham are very strong, with 1.1 million inhabitants. The city has the UK’s second largest population. It has a relatively youthful population with 47% of residents aged 30 or younger, which is higher than the national average. The population is expected to grow with a projected increase of around 177,000 between 2013 and 2037.

The Big City Plan is a 20-year vision to create a world class city centre and will expand the city core by around 25%. It will ultimately deliver 1.5 million square metres of new floorspace, 50,000 new jobs and contribute an estimated £2.1 billion to the economy each year.

These are very strong fundamentals indeed.

Hotspots

Some important hotspots to look out for within Birmingham itself include the Jewellery Quarter, the Convention Quarter, the Gun Quarter, West Side, Colmore Road, and Snowhill District.

Residential property demand

There is strong residential property demand in Birmingham:

According to Chesterton’s, Birmingham is the largest regional housing market in England with 423,633 dwellings recorded in the 2011 census. 55.2% of households own their own home and 17.9% of those rent privately.

Birmingham has five universities which makes this an excellent place to tap into the endless rental demand for property created by students.

Supply of available houses is at record lows and has been made worse by weak levels of new house building in recent years.

House Prices in Birmingham

House prices are rising:

Chesterton’s notes that average sale prices have been rising steadily over the past five years and are now 7.5% above their pre-recession peak.

Annual price growth up to June 2016 was 8.75%, ahead of the West Midlands average of 6.4%.

Yields on Rent

Yields on rent are among the highest in the country for property:

“Current gross initial yields are higher than in many other large cities in the country and considerably better than those on offer in London. Rental growth prospects are also strong given the projected growth in household numbers and the likelihood that supply will not keep pace with demand.”

Have a look at how rental yield in Birmingham city centre compares with other UK cities:

Key takeaways

In any prospective property investment hotspot, investors need to keep an eye on rental yield, capital growth potential and ensure their investment is supported by strong underlying fundamentals such as demographics, infrastructure and economy.

As we’ve seen from above, Birmingham is an excellent place for investors to be looking around as the city transforms over the next five years.
Resources

Knight Frank: The Birmingham Report 2016/17

Chesterton: Birmingham Residential Report 2016

JonesLangLasalle Residential: West Midlands Residential Forecasts February 2017