10 Reasons to Invest in Property in Birmingham and Where to Buy
The UK’s second-largest city after London, Birmingham is becoming a popular buy-to-let and investment property destination. Affordable housing prices, strong yields, consistent demand from renters and high predicted growth are the key reasons more investors are exploring their options in the city and why Birmingham remains in the UK’s top locations to purchase an investment property.
If you’re wondering whether adding a Birmingham property to your UK portfolio could be a wise decision, read on to find out our top 10 reasons to invest in property in Birmingham and the areas worth considering an investment.
1. Why Invest in Property in Birmingham? Strong Economy Potential
Known as the UK’s second city, Birmingham is the nation’s largest city economy outside of London. In 2018, Birmingham’s total GVA stood at £29 billion. As with other cities in the UK, COVID-19 has presented Birmingham with a number of economic challenges. However, national and international perceptions of the city continue to change to recognise it’s diverse economic sectors, young and entrepreneurial populational and growing visitor economy.
While the population of the city itself sits at around 1.1 million people, a total of 5.57 million live in the wider catchment area in a West Midlands economy worth £80 billion. The city’s population is on the rise too, set to reach 1.3 million by 2039.
In the last decade, Birmingham’s regeneration and job opportunities have attracted an influx of young professionals. The city itself is one of the youngest in Europe, with 40% of its population under the age of 25. Home to a young, working population, Birmingham presents buy-to-let property owners with a stable tenant market so it’s not difficult to understand why more investors are looking to Birmingham for their next or first UK property investment.
2. Birmingham’s Business Spur Demand for Housing
Almost half a million people work in Birmingham and the city is known as the West Midlands’ regional centre of business, retail, leisure and culture, and ranks highly for future investability.
As one of the largest business centres outside the capital, the city employs over 100,000 people and acts as a hub for the wider region. While Birmingham has a high number of public sector employers – including Birmingham City Council, the Queen Elizabeth Hospital and the University of Birmingham – in the last decade, the city has put in place policies to rebalance the economy and attract more private employers.
Today, Birmingham plays host to nationally and internationally significant companies, particularly in professional and business services, the likes of which include Royal Bank of Scotland, HSBC, DLA Piper and Eversheds.
Birmingham and the wider West Midlands region is recognised for its strengths in the mobility and automotive and health and life sciences sectors, in particular. The establishment of these high-net-worth industries is fueled by the city’s strong innovation resources and networks, including its 5 universities with internationally-recognised research facilities in areas such as engineering, creative industries, low carbon fuel technology and medical sciences. A testament to incoming investment this knowledge-economy attracts, Birmingham was selected as the UK’s pilot site for the nation-wide 5G network rollout and is seeing increasing investment in technologies like battery research for electric vehicles.
Birmingham’s growing number of businesses, jobs and high net-worth investment opportunities means increasing demand for suitable housing from an influx of workers. City-dwelling young professionals, in particular, are an appealing rental demographic for landlords, and economic prospects suggest that Birmingham real estate will continue to deliver good yields and increasing value in the coming years.
3. Demand for Property in Birmingham is Increasing
If you’re looking to invest in one of the best buy-to-let areas in the UK, Birmingham should be on your list of considerations. Two elements make investing in property in Birmingham particularly appealing over other UK cities.
The first factor is the city’s growing population. Already the UK’s second-largest city, by 2030, the population is set to climb to 1.24 million (from 1.1 million today). The second element is that Birmingham is experiencing a growing housing shortfall. An increasing population combined with a shortage in housing supply is likely to result in rising rental demand and property values – both appealing prospects for investors.
4. Birmingham Properties are Rising in Value
If you’re looking for the top UK city to invest in property in 2021, Birmingham tops the list, maintaining trends over the last five years that saw it remain within the upper rankings of best UK cities for property investors.
Between 2016 and 2020, property growth prices in Birmingham have been the highest in the UK, and, compared with 2009, property values on average have increased 45%. While property prices and rental values are likely to remain flat in 2021, house prices are expected to increase around 4% and rental value by 3.5%. In 2022, it’s expected that Birmingham will see some of the strongest house price growth through 2025 of between 14.2% – 17%.
With these attractive figures in mind, how does Birmingham fare as an investment property destination compared to other UK cities? The Birmingham property market is one of the most affordable in the country relative to its size and in 2020, the average property price in Birmingham was around £202,000 – over three times lower than the average property in London (£653,965).
Thanks to a vast amount of regeneration taking place across the city and continued demand from movers to the area – many of whom are relocating from London – the city’s future looks bright.
5. Birmingham Presents Property Investors with Attractive Rental Yields
Rental yields are a key consideration for any property investor, and Birmingham’s rental yields offer a strong return on investment. Today, Birmingham’s average rental yields sit at around 5.4 – 6 %. To put this into perspective, these figures are comparable to other attractive investment destinations like Liverpool, while London’s sit at around 2.83%. The B5 area of the city regularly achieves yields between 5% and 6%, while some student areas such as B4 near the city’s east side can reach up to 11%.
Low property prices and robust yields mean that investing in a Birmingham property can mean strong gross total returns for investors. Since 2019, rents have grown by 28% and are set to grow by 10% over the next four years, bringing much higher yields that might be seen from a property in the South. The affordability of housing makes the city particularly appealing for first-time investors due to lower initial costs – Birmingham is one of the UK’s most affordable places to invest in property relative to its size.
6. Birmingham’s Regeneration Means Investment Property Prospects
Birmingham is undergoing regeneration at a steady pace across all corners in the city and the cityscape is unrecognisable compared to a couple of decades ago. At the same time, Birmingham continues to rank as one of the most popular places to invest in Europe, attracting billions in retail, infrastructure, residential and commercial projects.
Regeneration and investment projects present a great upside for landlords and investors. Not only does the city become a more appealing place to live, but the standard of rental property and amenities continues to rise, which generally increases property and rental values.
A few of the key projects both completed and in the works include:
103 Colmore Row Tower
This 26-storey building is the tallest new office building outside London and will become the tallest in Birmingham once completed. It will feature Grade A office space, restaurants, and unrivalled 360-degree views of the cityscape as well as a 4 storey winter garden. Colmore Row has long been the business centre of the city and New Street and Snow Hill stations are only minutes away, putting it in close proximity to London via train, while the newly extended Metro offers trouble-free intracity connectivity.
Paradise City Redevelopment Project
A mixed-use development of office, residential and commercial space, Paradise Redevelopment Project represents a £700 million investment in the city and will comprise 10 new buildings, 3 new public squares and act as a hub for events, restaurants and cafes. The project began in 2020 and is set for completion in 2029.
Birmingham Smithfield is a £1.5 billion project that will see the development of the area south of the city into a new urban quarter. Set to take 15 years to complete, the project will bring a boost for the whole city and include a new home for Birmingham’s historic Bull Ring Markets, leisure and cultural facilities and more than 2,000 homes around a new public square. A project demonstrating the city’s future and how regeneration is helping to shape the city’s prospects, it is set to bring in 2,000 new jobs upon completion.
Birmingham Eastside and HS2
Eastside is known as Birmingham’s ‘knowledge hub’ and is home to a thriving community of researchers and businesses focusing on technology, learning and innovation. Once a major industrial quarter, the area is now home to Birmingham Science Park Aston, The New Technology Institute, Millennium Point and a new Engineering Academy.
One of the most exciting developments for the area is that Eastside is set to be home to the HS2 rail connection at Curzon Street Station. Putting London just 45 minutes away and bringing financial and commercial opportunities even closer, huge growth is expected from the amount of commuters coming in and out of the capital and Londoners looking to relocate to a more budget-friendly city with affordable housing that still offers all the conveniences of cosmopolitan living. HS2 is set to bring 30,000 new jobs and play a key role in rejuvenating the area.
Eastside Locks is a £450 million canalside regeneration scheme herald as the most “exciting and important city centre regeneration scheme in Europe”. The redevelopment will see the canalside environment completely transformed and feature new apartments, hotels, shops, bars and restaurants and courtyard spaces.
Birmingham City Council recently approved a £165 million project on The Soho Loop, a 1.2-mile section of the eighteenth-century Old BCN Main Line canal in Birmingham. The proposed plan will feature new homes, one and two-bed apartments and 10,000 sqft of commercial space as well as parks, gardens and improved commuting options into the city centre.
7. Property Investors Can Capitalise on Birmingham’s Strategic UK Location
One of Birmingham’s greatest advantages is its geographical position which places 90% of the UK’s population and businesses within four hours travel time. Strong rail, road and air connectivity brings plenty of opportunities for local and international businesses and the Birmingham economy.
Birmingham Airport is the UK’s third-busiest and recently underwent enhancement. Today, it welcomes nearly 13 million passengers each year and flies to more than 140 locations worldwide. The HS2 high-speed railway is set to bring Birmingham even closer to London and could turn the city into a commuter hotspot overnight. With the two cities set to be just 45 minutes from one another, Birmingham is expected to become increasingly popular with those looking to capitalise on opportunities in the capital as well as the increasing economic prospects of the city.
8. Birmingham’s Student Population Offers Investors a Key Rental Market
Birmingham is the UK’s second-largest student city and home to five universities, including Aston, Birmingham City, the University of Birmingham, University College Birmingham and Newman University College in addition to 20 universities within an hour of Greater Birmingham.
The city and surrounds are home to a thriving student population, and the scope and lifestyle offerings of the city continue to make it a popular destination for local and international students.
With the city’s student population sitting at around 80,000, Birmingham is an ideal location to invest in a student property. The number of students currently outnumber the amount of beds available and demand for student housing is a major part of Birmingham’s rental market. The city’s graduate retention rate has continued to grow over the past decade to reach 41% today.
With so many students choosing to remain in the city after their studies, landlords can capitalise on a steady stream of renters and young professionals seeking accommodation.
9. Birmingham is an Attractive Lifestyle Destination
Home to world-class museums, attractive night-life and historical and cultural attractions, Birmingham is becoming an increasingly liveable city.
Attractions like Cadbury’s World, Birmingham Museum and Art Gallery, Brindley Place and the Canal Quarter attract a number of visitors each year and the city is home to the highest number of Michelin-Starred restaurants outside of London, as well as home to plenty of parks, botanical gardens and other nature on the doorstep.
In recent years, Birmingham has benefited from the “Peaky Blinders” effect which sees tourists flocking to the area to explore the stories and locations in the popular TV series. This phenomenon helped the West Midlands attract a record 131 million visitors in 2018, and saw an increasing number of tours, events and attractions spring up part of a £12.6 billion tourist economy.
Set to give the city and local economy a further boost, Birmingham Commonwealth Games in 2022 will create 4,500 jobs while attracting 1 million spectators and deliver a £1.2 billion economic uplift. As host of the games, £778 million has been invested in the city and region, including a £70 million expansion of Alexander Stadium and a £60 million aquatics centre in Sandwell.
10. Which are the Best Areas of Birmingham to Invest in Property?
With regeneration taking place across the city, those looking to purchase an investment property in Birmingham have many areas to consider. The city has a number of hotspots that can provide attractive rental yields and price house price growth in the coming years.
As a key target for regeneration in the last 10 years, Birmingham City Centre offers diverse property options for investors. City centre postcodes present landlords with good returns and strong rental yields, particularly from one and two bedroom flats. With development projects like HS2, the Paradise Development, as well as The Big City Plan, properties in the City Centre can be a lucrative investment. Average property prices in the City Centre are around £186,175.
One to watch for future growth potential due to investment projects and regeneration, Digbeth offers an alternative to more established property investment hotspots like the Jewellery Quarter. Digbeth is known for being the city’s creative centre and attracts a young crowd in the city’s former industrial heartland. Its proximity to the main shipping areas, the city’s emerging Creativite Quarter, not to mention within walking distance to Curzon Street Station – location of HS2 – Digbeth has high growth potential and attracts both renters and investors. The average price of a property in Digbeth is around £184,749.
For investors looking to capitalise on Birmingham’s student rental demographic, Selly Oak is a key area to consider. Composed of terraced houses, most of which are occupied by students, the area is known as the “student village”, where most second and third-year students choose to live after their first year in university halls. Flats in Selly Oak sold for an average of £137,549 and terraced houses for £212,683.
Aston and Nechells
Located north of the city centre, Aston (B6) and Nechells (B7) have some of the city’s lowest property prices. Aston attracts a large student population from Aston University and offers landlords decent yields while remaining affordable. Average property prices in the Aston area are £126,252. In Nechells average property prices sit at around £109,417.
As one of the most affordable property markets in the UK and with HS2 and ongoing investment set to transform the city and bring economic and cultural opportunities, now is a great time to consider investing in property in Birmingham. Get in touch today to find out more about property investment opportunities in the city, including buy-to-let and student property investments.