Why Brexit holds no fear for Birmingham property investment

Inward investment and demographics are driving investment potential

The time to step into Birmingham property investment may never have been better. The city has become a tech hub and is the largest financial services centre in the UK outside of London. For some, however, the elephant in the room is Brexit. In this article, we discuss why delaying investment decisions because of Brexit could result in missed opportunity, especially for those considering investing in Birmingham property.

Is UK property still a buy despite Brexit?

The UK government is now negotiating the nation’s exit from the EU, and the question that many investors want to be answered is, what will Brexit look like when it happens in 2019? It’s impossible to say whether the UK will be in or out of the single market and the customs union, and what trade deal will be struck with the EU. One thing is clear, however: the fundamentals for property investment in the UK remain undiminished:

  • The demand for homes far outweighs supply
  • There is enormous investment in infrastructure and regeneration in towns and cities in the north, south, east and west
  • The UK has some of the best educational establishments in the world and is home to amazing retail and leisure facilities
  • Contrary to the warnings of economic carnage that a vote for Brexit would cause, the UK economy is still growing
  • International businesses are still investing and moving to the UK, and inward investment reached record levels in 2016

The signals for property investment are positive and strong. Consequently, average house prices are rising at twice the rate of inflation. Despite the attempts of government to dampen the private rented sector with property tax changes, the demand for rental properties has never been higher. It is well on course to reach the forecast 7.2 million household level by 2025. For investors, current mortgage interest rates appear to be as low as they will go – the Bank of England has recently hinted that the next move will be up, though they haven’t said when.

Why Birmingham property investment, and why now?

The fundamentals for property investment are extremely evident in Birmingham. So much so, in fact, that the city has been named as the UK’s top property hotspot in the Urban Land Institute/PwC Emerging Trends in Real Estate 2017 report. It’s an exciting time to buy into Birmingham property investment.

When considering the demand for homes, Birmingham’s population is expected to grow by around 12% by 2032. That level of growth is going to fuel demand for property in Birmingham, but the demand for new homes will also be fuelled by the city’s demographics.

Birmingham is a young city. The youngest in Europe. 40% of the population is under 25 years old. Just as new residents are being sucked into the city, its existing population are going to want to move out of their parental homes and into their own. It’s been estimated that Birmingham will need to build 80,000 new homes over the next decade to meet this dual demand from both the new and existing population.

The average wage in Birmingham is likely to increase, too. The city is projecting a near 14% increase in the number of skilled jobs in the city between 2013 and 2025. These will offer higher salaries, supporting an increase in rental demand. Further demand for rental properties is likely to come from commuters into London.

The HS2 effect

It may seem fantastical to say it now, but Birmingham could become a key commuter town for London workers. Currently, the journey time of nearly two and a half hours by train isn’t accommodative for commuting into the capital. But when HS2 starts its services in 2026, the journey time will be slashed to less than 50 minutes. Almost overnight, Birmingham will become a commuter town.

Today, 90% of the UK can be accessed from Birmingham in less than four hours. HS2 will make the country far smaller, bringing the cities of the North West to within 90 minutes by train.

Birmingham, already well connected, may become the UK’s main transport hub, with excellent road and rail links and a rapidly expanding international airport.

Demand from business has never been higher in Birmingham

Investment in transport infrastructure and regeneration schemes across Birmingham are encouraging businesses to migrate or startup in the city region. With five universities and a student population of 65,000, high-tech and knowledge-based industries have a natural pool of talent from which to hire.

The city is evolving into the UK’s tech hub. In the first half of 2016, Birmingham was the top regional city for start-ups, with more than 9,000 companies founded.

The city is receiving record investment from international firms, most notably from China and the United States.

The Big City Plan is a 20-year strategy that aims to create 50,000 new jobs. Swathes of the city are being redeveloped as mixed-use areas, transforming the retail and leisure industry here. Already hotel room numbers are expanding, buoyed by visitor numbers and 75% to 80% occupancy rates.

Birmingham property investment is producing market-beating returns

Many of the positives for Birmingham are yet to happen. But the investment capital is committed and affirmed, and key dates are written in ink (such as the arrival of HS2 in 2026). There has already been massive investment in the city – billions have been spent on the redevelopment of New Street station, and the new Curzon Street HS2 station, and the redevelopment of Birmingham Smithfield.

The effect on Birmingham’s property market of these landmark events and the money and business pouring into the city is already evident. The average house price increased by around 6% between July 2016 and July 2017. Rents are rising – the average is now £988 per month – and the average rental yield is 6.4%.

Birmingham exhibits all the ingredients for sustainable property investment: spectacular shopping and leisure amenities; great education establishments; a vibrant and young workforce in a local economy that is growing faster than the UK average; huge inward investment, which will drive further growth and demand for rental properties.

Forget Brexit, and focus on Birmingham property investment. To discover more about the amazing new build and off-plan property available in Birmingham,  contact one of the Gladfish team today on +44 207 923 6100.

Live with passion,

Brett Alegre-Wood

Brett Alegre-Wood
October 16, 2017

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