Why the Midlands Engine Strategy could accelerate property prices in Birmingham
When researching for locations to buy property, investors are likely to consider cities like Liverpool, Manchester and Birmingham. Themes that you are likely to come across include the ‘Northern Powerhouse’ (a key driver of investment potential in Manchester) and the ‘Midlands Engine’. In this article, you’ll learn about the Midlands Engine and why it could drive Birmingham property prices higher.
What is the Midlands Engine?
Just as the Northern Powerhouse project is an attempt to rebalance the UK economy away from London, so too is the Midlands Engine initiative. It’s a government policy that commits finance and resources into five distinct themes: skills, innovation, transport, promoting the ‘Engine’, and finance for business. There will be reforms to technical education, and support for industries through sector deals.
To further promote the strategy, UK Chancellor Philip Hammond announced how the government would invest:
- £392 million from the Local Growth Fund to support innovative projects in the Midlands. It is in addition to the £1.5 billion of Local Growth Fund investments already announced.
- £20 million in a flagship Midlands Skills Challenge to improve employment prospects for people living and working in the region.
Does Birmingham and the Midlands need the Midlands Engine?
The Midlands economy is valued at around £218 billion. That’s around 13% of the total UK GVA. Exports from the Midlands total about £40 billion, and the region accounts for almost 25% or the UK’s manufacturing output.
However, there is a wide productivity gap between the output here and the rest of the UK – when measured this way, the Midlands lags by approximately 15%. By strategising to close this productivity gap, the aim is to increase the Midlands economy by around £34 billion per year.
Birmingham’s economy is ahead of the rest of the Midlands region. It’s growing at a faster pace than the rest of the UK. Foreign direct investment in the Midlands has grown by 130% in the last five years and helped to create 14,000 new jobs. Much of this has been centred on Birmingham, whose economy is expected to grow from its current £23 billion GVA to more than £30 billion by 2026 when HS2 starts operating.
Birmingham may not need the Midlands Engine strategy, but it will be a direct and massive beneficiary of it.
What impact will HS2 have on Birmingham property?
High Speed 2 (HS2) looks set to transform Birmingham. The city is already incredibly well connected: it is within four hours’ reach of 90% of the UK’s population and businesses. HS2 will slash these journey times, and make Birmingham a place from which people can commute into London. Currently, it takes more than two hours by train to reach London. When HS2 arrives, that journey time will be less than 50 minutes.
It’s likely then that Birmingham could witness an influx of London workers looking for property in Birmingham, putting further upward pressure on an already increasing population.
To prepare for HS2 and higher population numbers, the planned £500 million Birmingham Curzon station will connect to Old Oak Common in North West London. This development alone is expected to provide a £1.4 billion economic uplift in Birmingham.
Also, Smithfield, near Birmingham’s Bull Ring, will benefit from a £500 million investment to regenerate the area. This mixed-use regeneration scheme will deliver retail, commercial, leisure and transport, as well as 2,000 new homes.
What we see in Birmingham is a massive investment, large-scale regeneration, and development of infrastructure and transport options to create a sustainable city for the 21st century. And this promise has already started to drive property prices higher.
An attractive place for businesses and workers
With the introduction of HS2, Birmingham will be even more attractive to companies and workers. The city region already has the highest number of businesses outside London, and there are indications that more will migrate from the capital.
Birmingham property is more affordable than London’s. The average price in Birmingham is around 17% lower than the UK average. The city is an attractive place to work, play, and live. It has a high ratio of young, well-educated professionals appealing to businesses. It boasts some of the best retail and leisure amenities in the country and is one of the best-connected cities in the UK.
Birmingham is regularly named as one of the best places to invest in property UK. Recently, it has been called the UK’s top property hotspot in the Emerging Trends in Real Estate 2017 report published by Urban Land Institute and PwC.
The increasing realisation of Birmingham’s potential is resulting in rising property prices in the city. The average property price in Birmingham is around £186,000. The average rental yield is above 6%. It appears the time to invest in Birmingham property has come: prices are trending upward, but are still affordable and offer great investment potential.
Discover more about the amazing new build and off-plan property available in Birmingham by contacting one of the Gladfish team on +44 207 923 6100.
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