Birmingham property investment analysis – ask the experts

By Surrenden Invest | October 4, 2018
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Investors from around the world are flocking to pick up property in Birmingham, with developments such as Westminster Works seeing a strong, sustained level of interest. In September, Birmingham was highlighted by PropCast’s England & Wales House Selling Weather Report, with four of the city’s postcode areas making it into the top ten best areas to sell a property. National property expert John Parker, Surrenden Invest’s Business Development Director, explains what it is that makes Birmingham so alluring, and why now is the right time to give full attention to this dynamic city.

Why is now the right time to invest in property in Birmingham?

Birmingham was named as the sixth best city in Europe for investment prospects in 2017 by PwC. 2017 also saw it crowned as the most improved city in the UK in which to live and work. With a youthful population (the youngest of any major city in Europe, with 45% of the population under 30) and an impressive cultural offering, England’s ‘second city’ has much to offer aspiring entrepreneurs and those looking to climb the corporate career ladder.
The city also has a bright future. At present, it is growing faster than 31 of London’s 33 boroughs, while HS2 looks set to cement its future as one of the UK’s leading economic power-houses. The high speed rail network will connect London Euston to Birmingham by 2026. This has driven a wave of investment in areas such as Digbeth and Curzon Street, as station works inspired by HS2 create a ripple effect that benefits the surrounding location. With £1 billion of investment behind the development work, several new neighbourhoods will result.
At the same time, a low supply of properties and extremely high property prices in London are driving buy to let investors out of the capital and straight into the open arms of markets such as Birmingham. Average property values have increased there by 31% over the last five years, while a further 20-30% hike in prices is expected over the next three to four years, off the back of the Big City Plan’s ambitious 20-year vision.

What should buyers look for in a Birmingham investment property?

It sounds simple, but the three questions I ask myself are:
– Would I buy it myself to live in?
– Can you rent it out?
– Can you sell it?
Other than that, it’s a case of choosing the area wisely. Birmingham is home to many affluent and emerging areas, with the Jewellery Quarter, the Convention Quarter and Digbeth all making names for themselves. The type of property also needs careful thought, with consideration given to renter trends. Larger apartments are growing in popularity and there’s a big shortage of them in city centre locations.
Finally, think about unique features. Homes with high ceilings or a premium specification will stand out from the crowd and should attract a queue of would-be tenants, thus minimizing void periods.

Which areas of Birmingham are particularly attractive to investors?

Birmingham has plenty of areas that investors are keen to be a part of right now. New Street Station (England’s busiest railway station outside of London) is where it all began. By creating a massive, impressive gateway to the city, with a smorgasbord of restaurants, shopping and entertainment right on your doorstep, it opened investors’ eyes to the city’s potential, and residents’ eyes to the benefits of a new style of urban living. Birmingham is now attracting plenty of people who want to live in the centre, working, eating, sleeping and playing all in the same ultra-convenient location.
With waves of large-scale regeneration sweeping Birmingham, the city has a number of investment hotspots, with the city centre as the core. The massive residential and retail zone of Smithfield and the new cultural quarter in the east are two great examples. In addition, the central business and shopping district is booming in terms of price, scale and the influx of companies moving in. The presence of Deutsche Bank, HSBC, HM Revenue & Customs and their ilk is drawing workers to seek centrally located homes.
In a nutshell, the most exciting city centre locations at present are the area around Mailbox and Holloway Head, the Jewellery Quarter, Digbeth and the cultural district to the east. Further out, both Edgbaston and Ladywood are proving popular.
The Mailbox
Ladywood
Holloway Head
The Jewellery Quarter
Digbeth
Edgbaston
Westminster Works

What should buyers be wary of?

Due to Birmingham having been heralded as the new darling of overseas property, and investors looking to avoid the over-inflated values and dwindling yields of London, the former’s property market is highly competitive, which can at times lead to frustration. Much of the city’s pipeline of residential developments have already been purchased off plan, while its burgeoning ‘Build to Rent’ sector is also introducing a new element of competition.
That aside, and with standard due diligence checks taken into account, price is probably the most important aspect to be wary off. When you buy off plan, it’s important not to pay over inflated prices, especially in the more prime developments in the city.
It’s common to see developments that are selling out some 18 months before completion and being market at prices that would be more appropriate were they completing today. It means that developers are not passing on the speculative discount that one should expect to receive for buying off plan so far in advance. Discounts of 10-15% are reasonable; if an apartment would be worth £200,000 upon completion today, but won’t be complete for another 18 months, then a price of £180,000 would be more appropriate.

What kind of due diligence should investors carry out?

That aside, and with standard due diligence checks taken into account, price is probably the most important aspect to be wary off. When you buy off plan, it’s important not to pay over inflated prices, especially in the more prime developments in the city.
Other than that, put yourself in the rental market mindset. Rental demand is the number one factor that will drive capital growth, as well as being critically important to service any debt that you may have on the property. Look into location, local infrastructure, public transport links, nearby amenities, entertainment options, bars, restaurants and anything else that could contribute to the development being a solid rental investment moving forward.

What sets Birmingham apart from other UK cities?

Birmingham has a number of important selling points as a property investment location. Its extensive regeneration work means that pockets of potential and value are being unlocked across the city. Its youthful population and dynamic business environment are also key.
Then there is the London factor. Take Holloway Head as an example. It might not look like much now, but many are already labelling it the soon-to-be ‘Millionaires Row,’ meaning that they are hedging their bets on a new tide of London-centric commuters being brought in by HS2. When complete, HS2 will mean that people can travel from Birmingham to London in the same time it would take to get from Dulwich (in South East London) to the West End. That’s going to make a big difference and it’s something that other regional cities, which are further from the capital, simply can’t offer.

What is your top piece of advice for those considering investing in property in Birmingham?

Think carefully about the location you choose, particularly if it’s short term capital growth that is driving your investment.

For regular updates from John and his fellow national investment and property experts at Surrenden Invest, follow us on social media.

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