With prices in London spiraling out of control, businesses and individuals alike are looking outwards at other cities to invest and live in. Previously, we have discussed the benefits of property investment in Manchester, and today we discuss the appeal of investing in Birmingham. Birmingham’s cultural offerings, more affordable prices and booming business sector has made it an increasingly attractive prospect.
Birmingham – Britain’s Second City
Birmingham is often affectionately known as Britain’s second city, having one of the largest populations outside of London. Birmingham has the one of the largest legal and financial services centres outside of London, with a GVA of £226 billion. It also enjoys a strategically advantageous position in the country, as 90% of the population can reach Birmingham in under four hours.
It is predicted that with the construction of HS2, more people will move to Birmingham and commute to London. HS2 journey times between Birmingham and London will take 49 minutes – the typical London journey to work is 45 minutes. Can you imagine what impact that will have on Birmingham house prices?
More people commuting will increase demand for land and thereby drive up the associated cost of new developments. As land costs rise the feasibility of new developments becomes constrained. Fewer developments means more demand for a limited supply, which is positive for rental income and capital growth.
Birmingham’s Young Population
Similar to Manchester, Birmingham boasts a young population – the youngest of any major City in Europe in fact. Under 25s make up 40% of the population, and one third of the city’s inhabitants are from an ethnic minority, making it one of the most diverse cities in the UK. Its young demographic lends itself well to the rental market, as young adults generally do not have the capital to invest, or the inclination and would rather experience living in different areas.
Recent graduates of Birmingham’s universities are also increasingly likely to stay in the city, due to the quality of life, more affordable prices and job prospects.
Birmingham’s Cultural Offerings
Birmingham also offers a wealth of cultural experiences for residents and visitors alike. Outside of London, Birmingham is home to the most Michelin-starred restaurants and has a thriving arts scene. More tickets are sold at the Birmingham Hippodrome than by another theatre, including the West End. It also boasts the unique Jewellery Quarter, home to Europe’s largest school of jewellery, and the UK’s second oldest independent art gallery; the Royal Birmingham Society of Artists. The Jewellery Quarter is another area in Birmingham that has been pinpointed for regeneration, with the aim to develop the Quarter into a hub for creative businesses.
Having a colourful arts and culture scene provides a huge benefit to cities in terms of attracting new residents and boosting tourism. Galleries, museums and theatres help enrich the lives of current residents and these attributes makes the area a more appealing place to live.
Birmingham’s Booming Business Sector
In the past, Birmingham has beaten other cities to the top of the table in terms of economic growth, as its GVA increased by 4.2% between 2012 and 2013. Birmingham was also HSBC’s chosen city for their new headquarters which created 1000 jobs and Deutsche Bank increased the number of people their employ in Birmingham from 50 to 2,000.
In 2016 LaSalle Investment Management invested £100m into a private rented sector scheme, clearly recognising the city’s potential. They will take a long leasehold in 603 build to rent apartments due for full completion in 2019.
Knight Frank recently named Birmingham as the UK’s number one business hotspot and with the creation of new jobs, young talent has followed. In 2015, 6061 people moved from London to Birmingham, which is more than to any other city.
The government’s “Midland Engine” scheme to stimulate economic growth will also boost Birmingham’s outlook.
The Midlands Engine
Birmingham is a city targeted in the Midlands Engine. The Midlands Engine is a government initiative aiming to stimulate economic growth in the East and West Midlands. The aim is to create 300,000 new jobs and £34 billion worth of growth within the next 15 years through focussing on five key themes – skills, innovation, transport, promoting the initiative and finance for business. The government is backing the scheme with a £5 million investment package, aiming to promote the initiative overseas and boost exports.
The creation of 300,000 new jobs across the midlands will obviously bring with it new working professionals in need of accommodation, thus increasing rental demand. It will also positively affect capital growth prospects as when the young professionals go forward in their chosen career and start to save, they will start looking to buy their own property.
Birmingham’s Housing Market
Birmingham has already made a case for itself as an attractive city for workers and businesses, and the significant amount of investment being pumped into the city will only see interest soar. Birmingham’s affordable housing stock has long been a key-driver in why it is considered an attractive place to live and invest. It is also worth noting that although investment for new homes in Birmingham is now being made, it is not enough to resolve the problem of few second-hand homes being put on the market. This means that there is fierce competition in the property market for homes in Birmingham.
Birmingham is frequently named as one of the best cities for buy to let, due to its high proportion of young professionals and modest house prices. Due to its increasing popularity, house prices are rising, and have been forecast to rise at a faster rate than London. According to Hometrack, year-on-year house price growth in Birmingham stands at 7.4% in January, compared to 6.4% in London. So now seems like the ideal time to invest, whilst house prices are still reasonable, even though they are on an upward trajectory.