Birmingham Property Market in 2021
Demand for Birmingham property continues to rise, as buyers seek investments that offer both affordability and high growth potential. As the market continues to thrive following the vaccine rollout, Birmingham is one of the few markets that has demonstrated its resilience. Prices have remained flat during 2021 and are set to see leading growth.
Of all the markets that they monitor, Savills believes Birmingham will lead the way for property price and rental price growth over the next five years. At a time when many other cities have seen prices fall – it’s expected the second city will see growth of 24% over the next four years.
Similarly, rental prices are expected to remain the same during 2021 before rising by 12.5% over the same period.
As Birmingham continues to experience an undersupply in housing, investors will likely see a positive impact on rental prices. As the market grows more competitive – especially with the catalysts of HS2 and the Commonwealth Games – it’s not unlikely that the city could see prices trend upwards.
Since 2018, the average rent for a 2-bedroom property in Birmingham rose by 2.7% and pre-lockdown forecasts had rental growth pegged at 3%, which could be supported by the vaccine entering circulation.
Birmingham Supply & Demand
One of the major drivers of Birmingham’s growth for investors is the continued shortfall in housing compared to demand.
Research suggests that Birmingham needs 4,000 homes per annum over the next 10 years to meet demand. In reality, the average supply has been around 900 new homes per annum since 2010, highlighting the disparity between supply and demand.
This is a clear example of a competitive market with plenty of potential for investors. While Birmingham City Council is looking to accelerate the delivery of new housing solutions – including private sale, build-to-rent and student accommodation – this is still a relatively long-term pipeline.
So what does Birmingham demand look like? 60% of the population is under-35 and largely made up of young professionals – one of the most desirable tenants in the Buy-to-Let sector. Young professionals also make up the largest % of the UK rental market and continue to rent long-term, making Birmingham a clear leader for investors.
As Birmingham continues to attract new businesses and build improvements to its infrastructure, expect this demand to rise alongside its population.
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- Predicted property price increases in Birmingham of 19.5% by 2025
Birmingham Economic Forecast
Even with a leading standard of growth, the average property price in Birmingham is significantly cheaper than the UK average. This makes the city an appealing prospect for those who want affordability and still maintain a high growth ceiling.
Birmingham’s average income to average house price ratio is considerably lower than many nearby cities – sitting at 7 compared to London (12.9) and Bristol (9.4). This means a large proportion of the population is developing significant spending power compared to the relatively low rental costs and property prices.
To this end, as the UK’s second-biggest business hub, Birmingham is laying the foundations for rapid economic expansion. It’s expected that the gross value added (GVA) of the city will climb by 16.4% by 2030, faster than the average for the region. While this growth has been hampered by the global pandemic, experts believe the UK economy will return to pre-COVID levels midway through 2022.
Finally, Birmingham has also been named one of the most transparent cities in the world – highlighting the city’s focus on transparency through sustainability and smart technology. According to Ian Cornock, head of UK regions and Midlands at JLL: “Birmingham has held a long-term and far-reaching appeal for both international and domestic investors. In addition to its inherent fundamentals that attract capital, the significant yield compression seen in key European cities has created a notable arbitrage with the UK on a risk-adjusted basis which is leading European and global investors to look towards cities like Birmingham in the search for yield.
Birmingham Past Performance
Although Birmingham suffered the same muted activity that the majority of the UK did during Q2 and Q3 of 2020, it seems like 2021 and beyond represents a much brighter future.
Knight Frank expects Birmingham property prices to rise by 13% over the next five years, while rental growth is expected to grow by 10% over the same timeframe.
Similarly, Savills has cited Birmingham’s past performance as a reason for them sticking with their prediction of 15% growth by 2024. The average property in Birmingham rose in value by £57,000 over the last ten years, demonstrating the market’s history of resilience.
With the 2022 Commonwealth Games on the horizon, this global event will be a major catalyst for Birmingham growth. In the past, the games have delivered thousands of jobs and hundreds of millions of pounds for host cities and it will likely do the same for Birmingham. At a time when there has never been more transformational activity occurring across the city, the Commonwealth Games will shine a spotlight on what makes Birmingham the leading UK investment market.
Key Projects Driving Growth in Birmingham
Over the last ten years, developments in Birmingham have pivoted to be much more ‘mixed-use’, providing progressive working spaces nestled amongst residential and commercial projects that integrate smart features.
This makes the next steps for Birmingham even more vital. With such an exciting development pipeline, it’s important that the city continues to evolve, pushing new projects and progressing large-scale regeneration. Birmingham is in a relatively unique position due to its geographical location. As the anchor of the Midlands, it is well placed to benefit from developments such as HS2 to capture new business and attract ambitious young professionals.
Obviously, this also means building the amenities to retain that talent. With the Midlands Metro Expansion, Birmingham is creating the connectivity needed to support the wider region. Aside from making the city more accessible, it’s facilitating hundreds of jobs in the construction and operation of the line. Further in the future, HS2 will push the envelope for accessibility and open up the city to the London market. Both of these infrastructure projects will likely support rising property prices as transport links continue to be top priorities for buyers and tenants alike.
Similarly, Birmingham Smithfield will be the next major milestone for mixed-use developments in the city. With the expectation that it will create a new ‘destination’ for the city – much like the Bullring or Grand Central – it will help deliver more traffic to the Eastside and Digbeth areas.
For investors, all of this is a key signpost to why Birmingham is predicted to be the leading city in the UK for growth over the next four years by JLL. With property prices expected to rise by 19.5% over the next four years and rental prices to rise by 12% in the same period, now is the time to discover Birmingham property investment.