Recently described as the ‘jewell at the heart of the UK,’ known for being the most central location in Great Britain, Birmingham has always been the epicentre for UK transport as well as being widely regarded as the UK’s second city. But why are so many investors flocking to the investment properties of Birmingham and suggesting it will be the next city to make property millionaires?
Have a look at point 4 if you believe Birmingham is getting overpriced.
We look at the 7 reasons Birmingham has become a main attraction:
1. The youngest city in Europe
Birmingham has the youngest population of any major city in Europe. A young population which stays in the city is a massive indicator of growth. Young people moving to the city and staying means more jobs, more demand for property, which in turn pushes up property prices and rent.
Nearly 40% of Birmingham’s population is under 25 which is an incredibly healthy city statistic.
2. Huge multinational business’s have moved to Birmingham
Birmingham’s growth and quality employees has seen some of the biggest companies in the world relocate to the city with HSBC and Deutsche Bank becoming the latest to call this city home. PwC has taken the whole commercial space in Chamberlain Square as their strategy to make a major investment in the city has come to the fore.
Add these multinationals to the small and medium sized business’s and the scope for long term population growth, of an employee type earning high wages has a positive impact on property prices. Quality accommodation has increasingly become demanded, while the knock on effect of the overall rental and sales market is continuing to grow.
3. Constant property price increases
With a growth of 25% In property values in Birmingham postcodes over the last 5 years the market is showing amazing growth.
The old adage of ‘the trend is your friend’ here is prevalent, with JLL reporting a further 18% growth expectation on average over the next 5 years, with certain postcodes exceeding that.
Buying in now could see outstanding returns before the market has maximised its growth and starts to slow.
With point 3 many of us look at these markets and are guilty of assuming the growth has finished. Property prices can’t get any higher and we should be looking elsewhere, while equally not liking elsewhere as the market isn’t mature enough for our appetite.
While Birmingham has had resounding success, the early investors took the risks which have paid out, while now investors have a lot more information to go off, and as the points above show, a lot more growth to come.
While growth is continuous there will be a natural point where the property slows down its growth as the property values catch up to the wages in the city. This is exactly the circumstances in London where average property is 13.5 times the average salary of £35,000 causing a market slow down as wages catch up.
Birmingham has an average salary of £25,000 and growing quickly, and yet the average property is 6.44 times the average salary in all Birmingham postcodes, and 7.5 times that of the average salary in the core city centre.
This leaves a significant amount of growth remaining before a slow down in property growth for the city.
With pre-construction work underway on the London to Birmingham leg the HS2 has come under scrutiny in the press and parliament due to the costs of building this first leg, and what affect that will have on phase 2 to Manchester via Crewe.
While for the country the cost can be debated, for investors in Birmingham the two stations in Sheldon and Curzon create a once in a lifetime investment opportunity.
The scale of the prize for the city and all those invested in it can never be down played with commuting time dropped under 40 minutes into London. Naturally this will allow the two cities to better share business’s and staff, and have a significant effect on the Birmingham property prices closing the gap with London.
While the future phases could get ruled out, having the HS2 from Birmingham to London will always benefit the city. It will either be the central Hub of the line, connecting London, Manchester and Leeds, or even with just phase one it will become a location which is as quick to access from London as the majority of tube stops.
Historically Birmingham has not been a great provider of internal public transport links with the city coming under pressure for their emissions numbers.
With the commonwealth games and the HS2 coming to the city, along with huge numbers of new tenants, the city has had to start significant improvements to this which have already seen huge improvements in the core city centre and will grow to the fringe areas of the city, linking the HS2 in Sheldon into the city with a new metro route.
Historically residential properties which have had a metro line built connecting them to city centre infrastructure have seen growth of 12% – 25% when a the route is regular throughout the day.
With Birmingham’s huge investment into infrastructure it gives further options for investors priced out of core city centre to focus on great values on future public infrastructure.
Finally, and excitingly for Birmingham, the commonwealth games coming to the city in 2022 will further put the location on the map for local and international investors.
With large investment into the city residential property will likely see some real short-term growth from improved public amenities and overall investment both private and public.
Conclusion
To conclude Birmingham is booming and we have many years of various improvements to look forward to and capitalise on as investors.
Looking for 2 bed sharing options in the city centre for young professionals, or traditional 1 bed investments seems to be the key strategy with the vast majority of savvy investors.
With a 5 or 10 year investment plan the city could work wonders for your buy-to-let or portfolio.