London has long been viewed as the UK’s premier location for property investment. In recent years, however, high property prices and a lack of available supply in the capital have encouraged some investors to look elsewhere.
While there are many cities in the UK that are excellent choices for investment, low prices and high yields make Birmingham particularly deserving.
Birmingham might not be on every residential property investor’s radar, but the findings from our latest Global Real Estate Outlook suggest this could be about to change.
The Outlook reveals that investors in England’s second city have enjoyed substantial returns on their investments over the past 12 months, propelling Birmingham into our list of the best residential investment destinations in the world.
However, investors shouldn’t just think about the short-term gains when buying in the city; with a high-speed rail link to London on the way and a vibrant cultural scene, an investment in Birmingham is also an increasingly good long-term bet.
Manchester, Liverpool, and Leeds, have long been touted as the best destinations for residential property investment outside of London. While Birmingham has offered attractive returns for some time now, the fact that the city didn’t receive the same high profile commitments to development as the cities in the Northern Powerhouse has helped it to maintain a low profile. That isn’t to say that Birmingham hasn’t enjoyed economic successes in its own right however, with HSBC recently moving its entire UK retail banking operations to the city.
The rise in Birmingham’s stock is great news for those looking to get a foot on the property ladder or diversify existing portfolios. Birmingham first came to our attention due to its affordability and potential for future returns. Prices are far lower than those in London, which makes it a great option for new investors seeking an entry into the UK property market.
For buy-to-let property investors, there are also very good returns to be made on rental property in the city, with yields soaring by 24 percent in the city centre in the past 12 months to 4.25 percent. The great return on investment isn’t just limited to yields either.
Year-on-year house price growth for 2015-16 was 5.3 percent, and estimates put capital gains growth at 17 percent from 2015 to 2019. Buyers taking a holistic approach to their investment can therefore enjoy some very good short and long-term returns.
Beyond its booming local economy, there is also plenty going on in Birmingham to ensure strong demand for private rented accommodation. As a world-leader in higher education, the city is home to five universities and over 75,000 students, many of whom are set to stay in the city post their studies.
The influx of young professionals will continue to fuel demand in the city which far outstrips supply. If more international corporations choose to follow in HSBC’s footsteps and relocate their operations to the city from London, demand could be even greater in years to come.
For those looking to explore the Birmingham property market for the first time, the city looks set to continue its success into 2018 and beyond. There are substantial investment plans underway including the 20-year Big City Plan which seeks to increase the size of the city centre by a quarter and improve transport connectivity, while also providing 5,000 new homes and 50,000 new jobs.
The city has also poured substantial investment into its cultural offering in recent decades too, and it is now home to the Birmingham Symphony Orchestra, the Royal Shakespeare Company and the Birmingham Royal Ballet, along with a host of shops, restaurants and bars.
Birmingham is therefore ideally placed to become a leading destination for both domestic and overseas residential property investment. While London is likely to remain the many investors’ first choice, Birmingham is the latest regional city to come into its own and enable investors to diversify their property portfolios.
The Global Real Estate Outlook from IP Global can be accessed here.
*Hamish Pound is Head of Investment at IP Global