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Is Birmingham a Good Place to Invest in Property?

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Here at SevenCapital we love all things Birmingham. With one of the largest populations outside of the capital, Birmingham has developed itself as the ‘second city’, utilising its central positions in the country to build thriving professionals, retail and leisure sectors.

With increased affordability and huge levels of inward investment, Birmingham has quickly caught the eye of developers. But is Birmingham a good place to invest in property?

The Midlands Engine

Birmingham is booming. As cranes fill the skyline, the UK’s second city is establishing itself as one of the most popular locations in Europe to invest in – even more so than London. Thanks to its economic and strategic importance within the UK, Birmingham is attracting billions of pounds worth of investment in citywide retail, commercial and residential space as well as infrastructure projects.

As the Midlands Engine begins to take shape, Birmingham sits firmly at its heart. The government initiative is aiming to stimulate economic growth in the Midlands, creating 300,000 jobs and £34 billion worth of growth over 15 years.

The plan is to achieve this by focusing on five key themes – skills, innovation, transport infrastructure, business finance and promoting initiative.

As you’d expect. with the creation of 300,000 new jobs the need for accommodation will explode, increasing rental demand and stimulate capital growth. Initially, the government will kickstart this scheme with a £5 million investment package, designed specifically to boost exports.

Birmingham Property Market

Residential trends in Birmingham show a story of a city outperforming the market. With the annual growth rate for property prices sitting between 5% and 10% since 2015, Birmingham has seen an overall 43% increase of property prices since 2009.

Despite this growth, Birmingham still remains a much more affordable location compared to other markets in the UK. As the second city, Birmingham is often compared to London and it’s this comparison that showcases the biggest gap. New build property in the capital can often range between £1,000 and £2,000 per sq ft, whereas similar property in Birmingham would be between £350 and £450 per sq ft.

It’s this residential affordability and inward investment that creates the perfect storm for tenant demand. Birmingham has been the most popular destination for professionals and families leaving the capital for the last three years, attracting young workers who are looking for an affordable alternative to London.

Birmingham grew by over 100,000 between 2006 and 2016. By 2039, the population is predicted to rise again by 171,000, leaving a total population of 1.3 million. With the demand for quality city centre living remaining high, residential undersupply is a very real threat which creates a more competitive market for any property that is available.

Looking to the future, Birmingham is predicted a cumulative price growth of 14% from 2018 to the end of 2020, steadily rising each year.

Age of Birmingham’s Population

Birmingham has the youngest population of any major city in Europe with under 25s making up 40% of the population. Add to that the fact one-third of the city’s inhabitants are of an ethnic minority and you have one of the most diverse cities in the UK.

The second city also boasts a strong graduate pool from several excellent universities. These young professionals are increasingly looking to stay in the city thanks to better job prospects and increased affordability.

Generally, this means a dual demand of existing residents looking for new space while younger buyers or renters move out of their parental homes. Experts estimate that around 80,000 new homes will be needed to meet residential demand over the next decade.

Vibrant Birmingham Lifestyle

Any great city should aim to be unique. From the public spaces and amenities to the overall character of its design, lifestyle is an important factor to consider. In recent years, Birmingham has made significant progress in becoming a truly great city. Boasting a vibrant, youthful cityscape, Birmingham mixes the contemporary and the historic, providing a smart lifestyle without compromising what makes it unique.

Culturally, Birmingham has a lot to offer. It’s home to Europe’s largest school of jewellery with the Jewellery Quarter and the UK’s second oldest independent art gallery, the Royal Birmingham Society of Artists.

Increased inwards investment has also revitalised the Birmingham dining experience and nightlife offerings, providing an influx of restaurants and bars to suit all needs. With more Michelin starred restaurants than any other UK city (barring London), Birmingham is also providing alternative ‘everyday’ solutions. Attracting names such as The Alchemist and The Botanist on top of Be at One, The Ivy, Gusto and Gaucho, the second city is cultivating an exciting urban landscape.

It’s this diversification in retail opportunities that has driven ground floor rents, which have doubled over the past 5 years. As confidence grows in the ‘Birmingham lifestyle’, more and more businesses are looking to join the market, only strengthening an already diverse retail sector.

Birmingham’s Thriving Commercial Market

A ripple effect is spreading throughout the Birmingham commercial sector, bringing with it new commercial opportunities and investment. The ‘Big City Plan’ is well and truly in full swing, increasing the size of the city core by 25% and forecasting nearly 50,000 new vacancies as projects are completed.

The number of active businesses in Birmingham has also steadily risen, hitting 13.5% since 2016. This rate of growth is immense, three times the UK average, making Birmingham nearly unrecognisable from 10 years ago.

For the last five years, Birmingham has also topped the list for the highest number of new startups outside of London. With over 12,000 businesses set up in Birmingham last year, the second city had almost 4,000 more than Manchester in third place.

With the UK’s largest business, professional and financial services hub outside of London, a number of financial technology firms such as Falanx and Oxygen Finance are looking to take advantage of this huge potential market.

As a whole, the commercial development pipeline shows that both public and private investment is aiming to create schemes and spaces designed to meet the changing requirements of both businesses and residents.

So is Birmingham a Good Place to Invest in Property?

As you may have gathered, Birmingham has developed itself as an attractive location for workers and businesses. Huge inwards investment alongside affordable living conditions has seen interests soar amongst tenants, developers and investors alike.

Residential undersupply is also a major problem within the market. While the popularity of city-centre living continues to gather pace, there isn’t enough supply to meet the demand. This has meant stiff competition between tenants to secure accommodation, which is always good for property investors.

This is only set to continue as HS2 becomes more of a reality. By 2026, Birmingham will have unrivalled access to London. This not makes commutes easier but opens up opportunities for London workers to live in Birmingham, taking advantage of cheaper living costs. When combined with a population that is already forecast to hit unprecedented heights, Birmingham begins to show itself as a true property investment hotspot.

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