Move over London, a new UK investment capital is in town. The UK’s second city, Birmingham, is booming, quickly becoming an investor’s first choice, and Londoners are beginning to take note. So why is London losing its shine, and what do investors have to gain from Birmingham?
Ultimately, it comes down to potential, and as far as Birmingham is concerned, the city has an abundance. Where London has already peaked, leaving little room for any further growth — in terms of both house prices, development space and amenities — Birmingham has lots of room, and three crucial ingredients: future transport links, relocation of large employers and one of the youngest populations in Europe – notably around 75 per cent of the core city centre population is under 35.
The city has already undergone a significant transformation over the last 10 years, not just through a £750-million (Dh3.42 billion) revamp of and around its main rail station — the busiest in the UK outside London. Perhaps the most significant project, HS2, which is due to launch at its Birmingham home in 2026, will bring London within a 49-minute direct commute to Birmingham. It is this that could be attributed as the catalyst to a further wave of investment.
Global and major businesses, including HSBC and HMRC, have since relocated headquarter operations, boosting what is already the largest business, financial and professional services (BFPS) hub outside London.
Birmingham’s latest triumph is being host to the 2022 Commonwealth Games. This huge event will speed up imminent regeneration projects, including the new metro through the city, and highlight future projects — in particular the £1.5-billion Smithfield regeneration, which will extend the core central area of the city.
How does this affect the property market?
Over the past five years Birmingham house prices have increased by nearly 37 per cent on average, compared to London prices which have grown just 19.5 per cent — a figure that actually incudes a drop in house prices of 4.4 per cent over the last 12 months, while Birmingham’s prices continued to climb 4.3 per cent during the same period.
And according to JLL, over the next five years new-build values in Birmingham city centre are expected to continue upwards, increasing by a further 15.9 per cent, while rental values are set to increase by 16.5 per cent to 2023.
For investors and buyers alike this is good news as it means they are likely to see significant capital growth on their investment over the years to come. Also, as house prices in Birmingham are around 41 per cent lower than the average across the capital, the city is a far more accessible investment option for investors on both price and stamp duty, which has increased for second home owners and overseas buyers over recent years. And even with the projected rental value growth, it is also good news for renters.
Johnny Conran is director at Seven Capital. The views expressed here are his own.