Birmingham Investment Guide | Vesta Property Buy-to-let

Welcome to Birmingham

Birmingham boasts one of the most liquid housing markets in the UK so it should come as no surprise that house prices have performed exceptionally in recent years.

Reasons to invest in Birmingham 

One of the most liquid housing markets in the UK

Property appreciation has doubled the UK average growth rate for most of the last 5 years and last year had the greatest property price increase in England at 7.5% (Seven Capital), this was second only to Edinburgh across the entire United Kingdom. However, property still looks to be relatively cheap with an average house price of £197,461 compared to £228,147 across the UK.

Out of Birmingham’s 1.1 million population, 46% are under the age of 30 making it the youngest city in Europe. This is due in large part to Birmingham’s 2 university colleges and 5 universities with almost 65,000 students between them. This provides landlords with a perpetual supply of young professionals. Estate Agents Knight Frank are forecasting cumulative housing price growth in the city of 14% between 2018 and 2020 suggesting no signs of slowing growth.

Key Insight

STRONG ECONOMY

£28.1 billion

Growth rate of 27.7% in the last five years and has the largest economy of any city outside London

NEW BUSINESSES

18,590

New businesses created in Birmingham during 2018 – more than any other city outside the capital

DEMOGRAPHICS

46% under 30

1.1 million population, 46% are under the age of 30 making it the youngest city in Europe

STUDENT PERFORMANCE

67,000 students

Retention rate of 50% and more schools receiving an ‘outstanding’ OFSTED

CONNECTIVITY

90%

Of UK population accessible in under 4 hours and boasting two HS2 stations

2022 COMMONWEALTH GAMES

£350 million

A thlete's village will see circa 1,400 homes built on the former Birmingham City University campus

The Birmingham City Centre housing market is expected to perform strongly over the next five years with several notable catalysts for change.

JLL Residential Forecasts, Februrary 2019

Population & Students

UK’s youngest and fastest growing regional city

Birmingham has a population of 1.1 million, of this, approximately 46% are under the age of 30. Within the city centre, 75% of the population is under the age of 35 creating demand amongst young professionals.

Birmingham has a high student retention rate, retaining 50% of its 67,000 full-time students.

One of the factors contributing to Birmingham being Europe’s youngest city is the fact that the city is home to no less than 5 universities and 2 university colleges with a combined enrolment of approximately 67,000 students. By 2039, the population is predicted to rise by 171,000 to 1.3 million people.

Birmingham is the most popular location in England for Londoners moving out of the UK Capital, according to new statistics from the ONS.

JLL, West Midllands Residential Forecasts Februrary 2019

Economy

Strongest economy outside London

In spite of Brexit, global businesses are choosing to relocate to Birmingham to take advantage of the vast supply of educated, youthful workers. As well as this, Birmingham’s central location puts it within a 4-hour radius of 90% of the UK’s population. Since it was announced that the city would be host to the 2022 Commonwealth Games, domestic and international investment has flocked to the area.

With an economy worth £28.1 billion, Birmingham has a growth rate of 27.7% in the last five years and has the largest economy of any city outside London (Office for National Statistics (ONS)

Among the most notable developments are the £700 million Paradise development which will provide 1.8million sq. ft of office, retail and leisure space, the Big City Plan which aims to expand the city core by 25% and increase population by 100,000, the Midlands Metro Extension and of course the £56 billion HS2 project which will see travel times to London reduced to just 49 minutes.

The £1.5 billion Birmingham Smithfield redevelopment is the most significant residential development for the city adjacent to the Bullring and a short walk from the new HS2 terminus.

Other current development projects include Birmingham Smithfield, a £1.5 billion 42-acre retail and residential development and Arena Central which will serve as HSBC’s UK headquarters and the HMRC Midlands regional hub.

After several years of minimal development activity, these new major schemes are very welcome. Since HS2 was given the green light, demand for city centre living has far outpaced supply.

Business & Employment

Most entrepreneurial regional city

Birmingham is a leading European business destination. The city and surrounding region is home to 70,500 companies including over 1,500 international firms.

Historically Birmingham has been a city reliant on metal working industries, today manufacturing and engineering still play a large part however the economy is more diversified. Birmingham produces over £2 billion of goods every year and is home to the Jaguar car factory, Land Rover, JCB, Kraft, Amey, Deloitte and Cadbury. Birmingham is also responsible for producing one third of the UK’s jewellery.

With overheads and cost of living up to 55% below London, Birmingham is an attractive location to do business. Besides traditional industries, the city benefits from a thriving tech community and a developing startup scene. Local entrepreneurs are given a robust support thanks to programmes like Entrepreneurial Spark and Innovation Birmingham, which are working alongside investment groups such as Midven, Ascension Venture, Minerva and Finance Birmingham (European Digital City Index).

The city also boasts a thriving tourism industry with 41.8 million visitors in 2017 alone spending a combined £7.1 billion. Perhaps one of the main attractions is the intricate waterway that spreads for miles across the city.

Due to its young population, Birmingham is a hive of startup activity with 18,590 new businesses started in 2018 alone, the highest number in any UK city outside of London

StartUp Britain analysis of Companies House data

Location

Birmingham is located in the centre of the West Midlands region of England. It is the second most populous city in the UK after London.

Situated at the heart of the UK’s motorway and rail network, half the UK’s population lies within two hours and 90% within a four-hour travel time of the region.

Birmingham has been ranked the most popular destination outside London for association meetings, conferences and events, ahead of Manchester, Edinburgh and Leeds.

British Meetings and Events Industry Survey

Connectivity & Transport

Groundbreaking infrastructure delivers physical and technological connectivity

Birmingham has been awarded the title of most connected city in the country and it’s not hard to see why. £1.3 billion was invested in road, rail and air networks in 2015 making travel even more efficient (Business Birmingham).

Birmingham has excellent rail links to Edinburgh, Manchester and London with Birmingham New Street being the busiest station outside of London, recently transformed with a £600 million investment.

The motorways – M6, M42, M54 and M5 – service the city from all directions connecting all major UK cities.

Birmingham Airport serves 11 million passengers a year and is forecast to triple by 2030. 44 airlines serving more than 140 routes worldwide, including daily departures to New York Newark Airport plus twice daily services to Dubai.

The Midlands Metro extension will further improve connectivity to West Bromwich, Wolverhampton and Wednesbury among others. The use of this service reached 6 million people between 2016/17. This project is due to be fully completed in 2023.

Currently Birmingham is within an 8-minute train journey of Birmingham International Airport and a 45-minute drive to the East Midlands Airport. Upon completion of the £56 billion HS2 project, travel times between Birmingham and London will reduce to just 45 minutes making it a viable commuter location serving London.

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Property Spotlight

Over the past 10 years, house prices increased by 31% to Q3 2018, however two thirds of this growth took place in the past three years.

As published in JLL's UK Residential Research February 2019, recent months have been notable eventful for Birmingham.

In November 2018, the report states that Lendlease was chosen as principal contractor to build the £350m Athletes’ Village for the 2022 Commonwealth Games. Circa 1,400 homes will be built on the former Birmingham City University campus and the redevelopment of the former wholesale market at Birmingham Smithfield, a £1.5 billion 42-acre site will comprise over 2,000 new homes.

JLL suggests that after several years of low development activity, these new major schemes are a positive sign for the city. Since HS2 was given the green light, demand for city centre living has far outpaced supply; largely due to young professionals. The city boasts the youngest in Europe (ONS) and houses 67,000 students of which 50% decide to stay after graduation.

Birmingham was the most popular destination for people relocating out of London than anywhere else in the country (ONS).

Subdued development activity for the past few years has only added to the demand for rental accommodation in the city centre. Rental values in the city centre are typically £750pcm for a one bedroom flat and circa £950pcm for a two bedroom flat. City centre rents have risen due to a lack of available stock, with two bedroom flats increasing by 2.7% in 2018 (JLL).

Property Insight

GROSS YIELD

5.0% (-4.9%)

Median gross yields in L6 and L7 are the top performing areas in the UK achieving 8.3% and 7.1% respectively (REalyse, June '19)

PRICE PAID

£187,292 (+2.6%)

Median price paid has grown steadily over the last 5 years (circa £154k - £187k) showing +21% growth (REalyse, June '19)

ASKING RENT

£716 (+2%)

Median rent has grown over the last 12 months and 19% over the last 5 years (REalyse, June '19)

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Property Overview

Overview by property type (12 month average)
Price Paid (over 5 years)
Asking rent

Source: REalyse June 10th 2019

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Glossary

£/sqft Paid

Median sold prices on a £/ sq ft basis by property. Calculated by combining Land Registry data with property listings and EPC data to determine the number of rooms, type, size and sales values. Updated monthly in arrears

Price Paid

Median sold price by property type. Data from Land Registry. Updated monthly in arrears.

Discount

The difference between the median asking price and median sold price by property type. Calculated by matching property listings (data from c. 20 different sites and agents) with sales records from Land Registry. Updated monthly in arrears.

Gross Yield

Median gross yield by property type. Calculated from the asking price data for asking rent properties of a similar type (data from c. 20 different sites and agents). Updated monthly in arrears.

Supply

The average number of property listings for sale (from c. 20 different sites and agents). Updated monthly in arrears.

Transactions

The average number of sales recorded by the Land Registry (data from c. 20 different sites and agents). Updated monthly in arrears.

This report was written in June 2019 and is based on evidence and data available to Vesta Global Ltd at the time. It uses certain data available then and reflects views of market sentiment at that time. Any forecasts or projections of future performance are inherently uncertain and liable to different outcomes or changes caused by circumstances whether of a political, economic, social or property market nature.

Please contact Vesta for sources.

Important Note

All information contained in this website is provided as a guideline only, is based on estimates and assumptions, may not be accurate or complete, and is subject to change. We make no representations or warranties with regards to this information, expressed or otherwise. A buyer who relies on such information does so at their own risk. Buyers are advised to seek independent financial advice and should undertake their own due diligence.

Your capital is at risk. Property values may decline and the property might not be able to be rented at amounts sufficient to cover debt interest costs, operating expenses and liabilities, and might not result in a positive cash flow. Property is an illiquid asset and should not be viewed as a short-term investment.

In no event will we be liable for any loss or damage, including without limitation any loss or damage arising directly or indirectly out of or in connection with the use of this website and the information contained therein.

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