City spotlight: Birmingham
Britain’s second city has been rebuilt over the last decade, attracting new businesses, young workers and property investors.
Birmingham was heavily bombed in World War II, and the rebuilding of the city, along with its expansion during the 1960s, was dominated by concrete, brutalist architecture.
Over the past decade, much of the centre has been redeveloped. Futuristic, award-winning structures have replaced the grey, concrete buildings of the past, breathing new life into the city. The local economy has also been embracing the future, and the emergence of technology industries, such as biomedicine,1 have helped Birmingham bounce back from the global financial crisis. The economy has also been supported by major infrastructure projects.2
Consequently, Britain’s second biggest city by population is enjoying a growing sense of confidence about its future. With increasing inward investment and expanding businesses, Birmingham has become a magnet for new workers, fuelling demand in the local property market.
This momentum is attracting the attention of international property investors, lured by impressive rental yields and lower prices compared to London or Manchester. “Suddenly everyone wants to invest in Birmingham. When you drive around the city, you’ll see lots of evidence of new activity,” says Donna Smith, National Investment Director at estate agent Connells.
Birmingham has had a particularly strong revival over the past 18 months, says Smith, helped by the £750m redevelopment of its main railway station, New Street, along with the central shopping area.3
Work is starting on the much-anticipated first phase of HS2, a £56bn high-speed train line between Birmingham and London, due to open in 2026.4 The city council also recently announced several large transport projects, including a £1.2bn programme to get ready for HS2. A further £4bn will be spent over the next four years on a new network of tram routes and rapid transit buses.5
There has been significant investment in Birmingham by Asian investors. Birmingham City Council recently led a trade mission to China, and since then two residential projects have been announced.6 The most recent is a block of 214 apartments to be built in Ladywood, to the west of the city centre.7
Birmingham’s three universities have also played a strong role in attracting investment and encouraging entrepreneurial activity in the city. For example, in 2008 Aston University help set up what is now Birmingham Science Park Aston, which has so far helped incubate 140 start-ups.8
“Now that Birmingham has got its transport, development plans and funding in place, it’s being recognised as a major player in the global economy,” says Rupert Stevens, Senior Product Manager for Premier Mortgages at Barclays.
“This, coupled with both a favourable exchange rate since June and the UK’s robust home buying process, has attracted investors from the Middle East, Asia and Europe.”
A HOUSING MARKET RECOVERY
One of Birmingham’s attractions for investors is its under-developed, city centre new-build property market, which has taken longer to recover from the recession than other regional cities.
“The recovery in house price growth is at an earlier stage here,” says Donna Smith. “For example, you might expect to pay between £700 and £2,000 per square foot in London, but in Birmingham it’s between £270 and £350.”
This is reflected in figures from Hometrack, which says that Birmingham’s house prices increased by 7.7% in 2016. And the recovery started from a lower base. The average house price in Birmingham is £145,500 compared to £482,800 in London, it says.9
Meanwhile, the number of people renting in Birmingham has risen steadily, from 12% of all households in 2001 to 18% in 2011.10 And a report by investment manager Hermes recently concluded that major regional centres such as Birmingham can expect to enjoy a period of sustained rental uplift.11
This is helped by an increasing number of young professionals moving from London to more affordable cities to both work and live. It was revealed recently that Birmingham is the most popular destination among these ‘London escapees’ who are attracted by lower house prices and rents.12
OPPORTUNTIES FOR INVESTORS
Birmingham was recently ranked sixth in Europe for investment and development prospects, nine places above London.13
Like regional centres in several other European countries, it benefits from offering investors good value, says PwC. It reports that its clients believe they are going into Birmingham at an ‘earlier part of the rental growth cycle’.13
“Gross initial yields are higher in Birmingham than in many other large UK cities and considerably better than those on offer in London,” says Nicholas Barnes, Head of Research at Chestertons.
“Rental growth prospects are also strong given the projected growth in household numbers and the likelihood that supply will not keep pace with demand.”
Birmingham’s central zone is split into six ‘quarters’ each featuring different rates of economic improvement. The two fastest-growing are the Jewellery Quarter to the north of centre, and the area around Digbeth bus station, situated on high ground to the east of the central shopping district.
The Jewellery Quarter began its uplift earlier and several large-scale developments are already going ahead, including the recently-approved £80m St George Street Urban Village.14 It will include 600 homes within apartment blocks and a row of townhouses all within a six-acre site.
Digbeth is Birmingham’s creative quarter, where the city’s artisans, media companies and digital start-ups are based. Land in the area is being bought up by big development companies such as Seven Capital.15 Also, six new development zones, including the famous Typhoo Wharf, are now earmarked for regeneration.16 Digbeth already has at least half a dozen apartment blocks either under way, recently completed or going through planning.
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