Birmingham Housing Demand Reaches New Heights
It can’t be understated how important supply and demand is to an investment. Whether it’s the stock market or property, supply and demand directly impacts the price of the stock and thus, is a key metric for investors.
As you’d imagine, low availability of a product and high demand is the ideal scenario, boosting both market and rental prices and, in the case of property, ensuring a steady stream of interest from tenants. This is typically what we’re seeing across the UK in what we call ‘regional cores’ – key cities outside of London such as Birmingham that are witnessing ongoing undersupply.
Consider, for example, the housing assessment created to measure between 2011 and 2031, which highlighted a need for around 89,000 new homes to meet demand. The wider Birmingham development plan only accounts for 51,000, a shortfall of almost 38,000.
This has created a huge disparity and led to an incredibly competitive investment market within Birmingham, where relatively affordable property is growing in popularity at an incredible rate.
As Birmingham’s population continues to rise, local plans have identified a need for a further 2,500 homes a year to meet demand and clear the backlog. That said, if population forecasts are to be believed, Oxford Economics suggests that more than 3,300 additional households will need to be created each year until 2030, showcasing just how quickly the city is rising in popularity.
But what is causing this incredible shift? As previously mentioned, Birmingham continues to be a notable exception in the UK in terms of the ‘average house price to average income ratio’. Devised by Knight Frank, this ratio demonstrates levels of affordability in the property market when compared to the average income.
The UK as a whole has an average ratio of 7.6, whereas in Birmingham it is 6.5. This is much lower than other key areas such as London (12.1) or Bristol (10.2) where property is much more expensive. This highlights the significant advantage that Birmingham has compared to the wider UK when it comes to attracting and retaining talented workers, which obviously need accommodation.
This brings us to our second major point of attraction – what the city itself can offer. Birmingham is one of the fastest-growing cities in the UK because of the regeneration, inward investment and career opportunities it can deliver.
Economic expansion is being driven by lower property prices as major companies relocate their headquarters to the second city and start offering much more attractive roles with a higher income.
This in turn has sparked large scale regeneration, building the travel, retail and leisure amenities that this ambitious new workforce is looking for. From the redevelopment of New Street Station to major new projects such as Birmingham Smithfield and HS2, this level of regeneration is a major part of the cycle of attraction – new employees come seeking better amenities which are fueled by the positive economic impact that the workforce contributes to.
For investors then, it’s vital that they consider taking advantage now. The Birmingham development pipeline continues to swell – just over 6,500 units are estimated to be under construction – meaning that this chronic undersupply, and the opportunity to maximise returns from natural market growth, won’t last forever.
The overall market in Birmingham has changed significantly over the last ten years and as the new-build market matures, it’s important that investors also prioritise quality. It’s not enough to just have the newest development any more, as tenants want to live in quality apartments. Past evidence suggests that schemes which are in key Birmingham locations near workplaces or travel links, and built to the highest-specification will hold a significant advantage in a competitive market.