Birmingham Facing Low Quantity, High Demand
If you asked every property investor in the UK what their preferred property asset would be, you’d no doubt receive a variety of answers. From detached houses to duplex apartments, each asset has its own advantages and disadvantages as a Buy-to-Let (BTL) investment.
Similarly, UK BTL as a concept continues to be a solid option for an investment portfolio, boosted by a market worth over £1 trillion. As more and more people look to rent for flexibility and accessibility – it’s expected that renters will outnumber homeowners as soon as 2039 – the demand for large, high-quality accommodation is rising rapidly in prime areas.
Enter Birmingham, a UK city that is leading the way as a top investment location. With a population expected to increase by 200,000 over the next 20 years, we’re witnessing an unprecedented rise in demand that has placed a huge strain on a market already facing residential undersupply.
With a young population that is increasingly open to long-term renting, the private rented sector is the largest housing market in Birmingham and its population is largely made up of couples aged 25 – 49, creating an incredible appetite for larger apartments.
Research from PropertyData and Rightmove also shows that with an average occupancy of 1.8 people and nearly 30% less 2-bedroom stock than any other property, there’s a clear gap in the market for quality, 2-bedroom apartments near city-centre amenities – a gap that’s set to grow alongside the population.
Raj Bedi from Martin & Co, a Birmingham based estate agent, believes the market is struggling to meet demand: “There is huge demand from landlords to buy 2-bed apartments in Birmingham due to the wide range of tenants they attract such as friends sharing, couples and single professionals.”
So how is Birmingham maintaining such widespread appeal? It’s largely due to the regeneration and career opportunities that Birmingham can provide. Whether it’s young couples moving away from London – Birmingham continues to be the leading destination for those leaving the capital – or professionals that want to be at the heart of the action, rising demand cannot be ignored.
For investors, this demand can be highlighted in a much more tangible way. JLL predict that Birmingham property prices will rise by 12% and rental prices will rise by the same amount in the next four years. This is one of the fastest increases in the UK and it’s down to the inwards investment the city is receiving.
This isn’t just a short-term bounce either. Research suggests these tenants are likely to be renting long-term with 67% of sharers and 50% of couples still expecting to be renting in three years time – indicating the longevity that these assets have in the market.
The rise in demand for 2-bedroom apartments is symptomatic of a wider market shift to prioritising space. Increasingly we’re seeing both tenants and investors look for bigger properties for a variety of reasons, whether that be better performance in terms of rental returns or simply having more room.
For investors interested in Birmingham especially, this is a huge signpost that 2-bedroom apartments could offer lucrative returns going forward. With such low quantity and high demand in the second city, a growing, competitive market could mean an asset that starts delivering consistently and immediately, ideal for any portfolio.