BTL Birmingham: Why Property Investors Are Choosing The Second City

Birmingham is the UK’s second city and is widely regarded as one of the most investable cities in Europe.

Since being named in PwC’s “Emerging Trends In Real Estate Europe” report as a world-class city, regarded as ‘the most investable in the UK’ and ‘the sixth most investable in Europe’, Birmingham has added significant expansion.

In this blog post we analyse the buy to let market in Birmingham and why it is a prime location for property investment opportunities in the UK.

What is buy to let property investing?

Buy to let property investment is where an individual or company purchases residential property and rents it out to tenants rather than living in the property themselves.

This investment strategy has significantly increased in popularity over recent decades due to its potential for higher returns and ability to generate passive income.

Buy to let investing does not require active management from the investor as rental payments are collected from the tenant directly.

However, there is a need to meet legal requirements, tax obligations and maintenance costs. It is vital to be aware of changes in the property market for buy to let success.

Why is Birmingham perfect for buy to let investment?

With on-going regeneration works across the city, Birmingham remains one of the top places to invest in 2023. The Big City Plan, a 20-year city-wide transformation project, has made huge improvements to the city centre and several suburbs.

Birmingham has the huge advantage of affordability. Knight Frank research has found that the average income to average property price ratio is much better in Birmingham than across the wider UK.

The city’s economy is the UK’s second largest city outside of London. It is expected to see its Gross Value Added (GVA, the value of goods and services produced in an area) increase year-on-year by 1.1% in Q4 2023, rising to £29.6 billion. It has the fastest growing tech sector and a flourishing financial sector, meaning the city is attracting and retaining vast numbers of skilled workers that have income to spend. Birmingham is also the most popular destination for people moving out of London, and with 40% of the population under the age of 25 and a student retention rate of 49%, Birmingham has a sizeable potential rental market.

Two elements in particular make investing in property in Birmingham particularly appealing over other UK cities:

•     Factor one 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).
•     Birmingham is experiencing a growing housing shortfall. Birmingham has a shortfall of 78,415 new homes needed between 2020 and 2042.

With a market largely made up of one and two-bedroom apartments – at least in the increasingly popular city centre location – rental prices have increased by 18% in the last year alone.

Birmingham has also benefitted from hosting the 2022 Commonwealth Games and will continue to do so for years to come, particularly where the property market in concerned.

JLL predicts that in 2023, rental growth in Birmingham city centre could increase by 5%. This figure trumps other cities like Leeds at 3.5% and Bristol at 4%. In the year to December 2022, Birmingham rents rose by an average of 15.8%.

The city’s location provides a strategic opportunity for investors. 90% of the UK’s population and businesses fall within four hours travel time from the city. 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. It welcomes 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 turn it into a commuter hotspot. The two cities are set to be connected by just 45 minutes, meaning Birmingham is expected to become increasingly popular.

7 Reasons To Invest in Birmingham

Here are 7 more reasons to invest in Birmingham

1.     Strong economy

Birmingham is England’s fastest growing city outside the South and East of England. In the 18 months to the end of 2023, the size of Birmingham’s economy is expected to grow by £1 billion.

2.     Rising property prices

Average house prices in Birmingham have increased by 13.8% (£32,563) in the last year. Prices for two-bedroom flats are currently 27% higher than they were in 2017. Overall house prices are 10% higher than they were pre-pandemic. Average property values in the city are currently £269,385 and have the strongest house price growth in the West Midlands. 

Birmingham has some of the most attractive predicted house price growth rates. JLL forecasts 9.3% house price growth between 2023-2027 in the West Midlands region, above the UK average of 8.9%. Birmingham alone is forecast to see property values climb 19.2% over the next 5 years.

3.     Rental growth

With a rising population, high student retention and economic conditions meaning that aspiring homeowners are likely to delay the purchase of their first home. At the end of 2022, average rents for new one-bed city centre flats in Birmingham were £900 per calendar month, rising to £1,200 for a two-bed flat – a 16% and 20% rental growth, respectively, compared to the same period in 2021. Yields in the city are on average 5.5%, but can be significantly higher in popular student areas, meaning there are plenty of opportunities for landlords to make good returns.

4.     Sought-after lifestyle

Birmingham city centre has been hailed as one of the best places to live for young professionals. Digbeth has been coined ‘the coolest neighbourhood in Britain’ by the Sunday Times and is being compared nationally with the likes of Camden and Shoreditch. It represents the young, progressive side of Birmingham. It’s incredibly popular with graduates or professionals that want the excitement of Digbeth’s nightlife within walking distance of many arts and media businesses in the neighbourhood. 

5.     Accessibility

Birmingham has a convenient location and excellent infrastructure to travel further afield.

Birmingham to London is 45 minutes by train with HS2. This makes Birmingham city centre a hotspot for commuters.

For international travel, Birmingham Airport serves more than 140 destinations and more than 13 million passengers every year.

6.     Regeneration

Birmingham is undergoing regeneration at a steady pace across all corners of the city. The cityscape is unrecognisable compared to a few years ago. The Big City Plan is defined as “a vision to encourage and support Birmingham’s continuing transformation into a world class city”. This includes creating 1.5 million square metres of new floorspace, creating 50,000 new jobs and contributing £2.1 billion to the economy every year. Major developments include 103 Colmore Row Tower (the tallest office building outside of London), Paradise City Redevelopment Project, Birmingham Smithfield, Birmingham Eastside and HS2, Eastside Locks and SOHO Wharf. 

7.     Buy to let demand

One of the UK’s most popular cities being transformed by regeneration and investment with a strong student population and young professional rental market, Birmingham is one of the best places for property investment. With rents and property values predicted to rise by 2027, there are plenty of opportunities for investors. Birmingham’s five-year rental value forecast is an increase of 19.3%.

What is Smithfield Birmingham?

Birmingham is currently experiencing an unprecedented period of change as billions of pounds of investment transform the city’s economy. As one of the largest and most attractive city centre development sites in the country, Birmingham Smithfield will be a key part of this evolving growth story.

The site has all the ingredients to become a hugely successful and vibrant place, it will be able to capitalise on the rich history of the area; proximity to the major retail offer, the creative quarter and knowledge hub and the future city centre terminus for High Speed 2.

The future vision for Birmingham Smithfield includes new vibrant retail markets, exciting family leisure, cultural buildings, homes, public squares and transport facilities. Delivering 300,000 square metres of new floorspace, 2,000 new homes and an investment value of over £500 million.

But what will be truly transformational is the creation of a legacy for the city; a place for people that stands the test of time as an international exemplar of sustainable development.

Key features of the Smithfield development:

Vibrant markets and leisure: This will be at the heart of Birmingham Smithfield and see fantastic market shopping attracting new and exciting customers and a range of leisure uses supported by cafes, independent shops, restaurants and hotels. Situated on the site of the historic Smithfield Market, the new home for the markets will become a destination in its own right, with a mix of activity across a multi-layered building bringing life throughout the day and night.

Festival Square: The square will be a major new public space for the city that is a lively hub for cultural, community and arts events, activities, festivals and an attractive place for people to meet and relax.

Pedestrian boulevard: A wide, green pedestrian boulevard will transform pedestrian connections into the site allowing people to easily walk through the area along pleasant green streets and reach it from other parts of the city centre.

Integrated public transport: Metro, bus and sprint (rapid transit bus) will run through the site in dedicated greened public transport corridors providing people with a quick and efficient way of getting around the area and linking to the wider city and beyond.

Residential neighbourhood: A mixture of new, modern sustainable homes in a green setting supported by a range of community facilities will create an exemplar residential neighbourhood that will be one of the most desirable places to live in the city centre. At the heart of the residential neighbourhood will be a major new park creating a setting and location for amenity assets for the whole area.

Our newest off-plan development is situated at the heart of the Smithfield community. If this sounds interesting to you, join one of our upcoming webinars to find out about everything you need to know: https://shrtlnk.co/tPygx