Why invest in Birmingham?

Business Insight
06/02/2019

Birmingham, known as the UK’s ‘Second City’, has been undergoing a major transformation in recent years, driving significant levels of investment into the city.


The city centre itself is a vibrant hub of shops, restaurants, bars, and many other nationally recognized attractions such as the Birmingham Arena, Sealife Centre, Symphony Hall, and Birmingham Rep Theatre.


Birmingham is also home to a number of high profile organizations such as the BBC, ITV, Heart FM within the creative sector, HMRC are relocating 4,000 jobs to Birmingham City Centre, and major financial institutions opening head offices there – the likes of Deutsche Bank, HSBC, PwC, and Royal Bank of Scotland.


Young Population

So it’s no surprise that the population of Birmingham City Centre is one of the youngest in the Europe – with 45.7% of the 1.1 million population estimated to be under the age of 30. The job opportunities are in abundance, which is why many of the 65,000 students choose to stay in the city after graduating.


The Universities here have played a major role in transforming pockets of the city, with hundreds of millions of pounds spent over the last decade to provide some of the highest quality facilities of any Universities in the UK.


One of the largest areas of regeneration has been the New Street Station complex – in preparation for the HS2 line that will connect London and Birmingham in just 49 minutes – essentially making it an option for Birmingham residents to work in London.


If you also want some confidence that the ‘big boys’ are putting their money into Birmingham…PwC have recently purchased an entire building as part of a £700m development known as Paradise (https://www.birminghampost.co.uk/business/commercial-property/pwc-takes-entire-first-building-13990326) - very exciting for the regeneration of the area, but the addition of another 1,000 jobs has further added to the need for high quality city centre residential accommodation.


Birmingham or London?

In 2017 Birmingham was awarded the status of the most improved city in the UK to live and work. Reasons for this are largely down to the falling unemployment, and influx of inward investment projects.


Prices of properties in Birmingham are still considered very affordable with average city centre property prices £10,000 lower than Manchester and more than £1/2m lower than the average London property (Rightmove).


Yields in Birmingham are averaging around 6%, compared to London where investors these days are lucky to achieve 2%.


London in recent years has seen exponential price increases with some areas reporting double digit growth for 3 or 4 years on the trot. However, in the last 2 years, things have ground to a halt.


Mid- 2016, Brexit was announced which rocked the confidence in the London market, and a number of multi-national companies based in Central London. They couldn’t take the risk with such high priced property so they decided to look at opportunities to open offices elsewhere in the UK – many chose Manchester and Birmingham due to the good transport links, low cost of land, and a high level of talented graduates to employ.


In addition to this, the Chancellor at the time, George Osborne decided to slap an additional 3% stamp duty surcharge on any ‘second homes’, meaning investors purchasing for rental purposes were going to have to pay an additional 3% on top of the current stamp duty. For a £1m property, this meant an additional £30,000 in stamp duty. Ironically this generated £370m less for the treasury than before the change. This also put a lot of investors off the London market as it was costing them a few hundred thousand pounds extra to purchase the property.


(https://www.telegraph.co.uk/news/2016/11/14/stamp-duty-reforms-are-damaging-property-market-and-cutting-tax/)


This, along with yields plummeting, due to the rental prices not increasing at the same rate as the property prices, meant that investing in London was no longer seen as the smartest place for an investor to park their cash.


Over the next two years, prices stagnated. Sellers were reluctant to drop the price as they were waiting for that big growth cycle again, which meant that many first time buyers were now also being priced out of the market, and beginning to choose to relocate to other areas of the UK where they could spend half the amount that they would on a London property and get a property twice the size.


In summary, if buying solely for investment Birmingham offers a much greater opportunity. The level of growth in Birmingham exceeds the London market by a colossal margin – 6.6% annual growth in Birmingham versus London’s -0.3% (https://www.hometrack.com/uk/insight/uk-cities-house-price-index/august-2018-cities-index/).


Savvy investors are seeing these opportunities and are cashing out of London and cashing in on Birmingham before it’s too late. Once HS2 is completed prices in Birmingham will undoubtedly shoot up.


Which areas to invest in?

The city centre is always the number one location – as the population is getting younger, the demand for high quality city centre property is increasing. Young people want convenience. They want all amenities on their doorstep, they want to be close to their place of work, close to transport links etc.


Digbeth is also an up and coming area – more of a cultural hub with lots of activities and events on a regular basis, and only a short walk to the city centre. Or a 5-minute bus ride for those rainy days.


Jewellery Quarter – situated in the northwest part of the city, it’s an area full of character and class. Demand for properties here has always been high, and prices do reflect this. With over 200 listed buildings, you are unlikely to find a large amount of development in the area, so prices of properties in that area will always perform extremely well. The conservation area is home to over 100 independent retailers, and only a short walk from many of Birmingham’s historic landmarks, making it one of the most sought after locations to live. (http://visitbirmingham.com/birmingham-areas/birmingham/jewellery-quarter/)


In summary, Birmingham appears to offer opportunities for residents wanting to embark, and progress their careers, but also for investors looking for sustainable yields that outperform many other cities, including London, high capital growth potential, but at the same time not breaking the bank with an investment here.


To discuss investing in Birmingham, feel free to contact the Thirlmere Deacon team today, and one of our experienced Property Consultants will be happy to assist.


For further information please contact Thirlmere Deacon on: +44 [0] 203 950 7939

or visit https://tdpropertyinvestment.com