View of Victoria Square in Birmingham.
The city of Birmingham is emerging as Britain’s next major business hub, and is one area that keen property investors should look at for good buying opportunities.
By Michelle Yee
The uncertainty over Brexit is clearly not deterring investors from the UK property market. According to data from CBRE real estate group, Chinese investors spent £3.96 billion on London commercial property in the first six months of 2017, the highest amount on record, outdoing the £2.69 billion spent during the whole of 2016.
While London and Manchester used to be the hot favourites among investors, the city of Birmingham is rapidly emerging as the next property hotspot to look at in the UK. According to The Emerging Trends in Real Estate 2017 report, Birmingham was named the UK’s top location for property investment, surpassing popular cities such as London, Edinburgh and Manchester.
So, what is it about Birmingham that makes the city an attractive investment option? Experts cite a booming local economy, substantial investment plans in the city, as well as low prices and high yields as some of the main reasons.
Explaining why Birmingham is becoming more popular with investors, Florian Loloum, international sales & marketing director at Hong Kong-based property developer Top Capital Group, said: “London remains an asset building investment destination and will continue to attract large investors looking at leveraging their assets, but high cost entry levels and lower yields will deter income driven investors and those willing to build a property investment portfolio from investing in this market.
“Manchester has seen tremendous growth over the past five years. While it remains one of the leading property investment destinations outside of London, some areas are starting to see pockets of oversupply as the market matures. It may become difficult to maintain the rental yields seen in the marketplace so far. We can clearly see Birmingham is at earlier levels in the property cycle compared to Manchester. New-build units in Birmingham are still 60 percent cheaper than similar properties in London and supply is still low compared to Manchester as the city is catching up with the demand.”
At a recent seminar hosted by Top Capital Group in Hong Kong, the Birmingham City Council leadership team highlighted that Birmingham would need an additional 90,000 homes over the next 10 to 15 years to support the city’s expected population growth. This is notably driven by the influx of multinational corporations such as HSBC and Deutsche Bank as they relocate some of their UK headquarters from London to Birmingham, which is expected to drive economic growth and housing demand.
“Birmingham is not only the second largest city in the UK, but is also the largest labour market outside of London,” said Waheed Nazir, strategic director, economy at the Birmingham City Council. “Approximately 40 percent of Birmingham’s population is under the age of 25, many of whom are highly educated and from the city’s five universities, which makes the city an attractive talent pool for businesses and one of the key reasons why those businesses are relocating to Birmingham.”
Why invest in Birmingham?
Major infrastructure improvements
Within a span of a few years, Birmingham’s skyline has changed dramatically to attract businesses here, and while more than one million square feet of new offices have been created over the past few years, there is more construction in the pipeline, which is set to transform Birmingham into a global financial services hub in the future.
“Since unveiling its Big City Plan in 2010, Birmingham has seen numerous major infrastructure investments commence, notably the £600 million redevelopment of New Street Station and Grand Central, £500 million for the Smithfield Market, and £500 million for Paradise Circus and Arena Central.
“The city is geared to expand its core area by 25 percent by releasing more of its green belt on the city fringe. The Big City Plan also envisions more road connections to the major highways that surround the city. An extensive metro and light rail linkage is now ongoing and a more comprehensive web of pedestrian connections is also planned. In addition, the proposed High Speed 2 (HS2), a new high-speed rail network that will link Birmingham with Manchester, Leeds and London, is expected to bring even more people to the city in the future. When completed in 2026, HS2 will shorten the journey from London to Birmingham to just 39 minutes. As a result, the city’s exceptional connectivity will contribute further to its economic growth,” said Loloum.
Booming local economy
Between 2017 and 2021, analysts predict Birmingham’s economy to expand at 1.6 percent per annum, with the financial and business services sectors leading this growth at an expansion rate of 2.3 percent per annum. Parallel to its growth, the city’s financial services industry will see the addition of 5,400 jobs to its workforce over the coming four years, equivalent to a 4.0 percent increase.
Healthy capital growth
According to Knight Frank, house prices in Birmingham have grown significantly over the past few years. In 2013, it grew by 4.1 percent, in 2014 it was 5.6 percent, and in 2015 it was 5.5 percent. Then last year, figures showed that house prices grew by a whopping 7.1 percent. The team from Knight Frank adds that this upward trend is likely to continue, with house prices estimated to grow by 23.9 percent between 2017 and 2021.
High yields
Due to an increasing number of young professionals relocating to the city centre, analysts reckon that Birmingham will remain a very strong rental market. “Yields are expected to remain between 5.0 percent and 6.0 percent for quality projects in prime city centre locations,” said Loloum.
The team from Knight Frank, too, foresees healthy rental growth of about 19.7 percent between 2017 and 2021.
Looking ahead, experts expect demand for housing in Birmingham to continue to flourish due to a limited new supply. That said, there is no doubt that the abovementioned factors will continue to drive strong demand from both local and overseas property investors.
Buying tip
According to industry professionals, the UK is one of the easiest property markets to invest in. “Developers offer scaled payment terms for off-plan properties with the bulk of the balance to be paid on completion. Unfortunately, Singaporean banks do not offer any mortgage options to Singaporean investors for properties outside of London, but several UK-based banks are offering mortgage solutions. Stamp duty taxes are low compared to other overseas property investment destinations of between 2.0 and 5.0 percent, depending on the price of the property and whether the buyer owns other properties. There are also no restrictions when it comes to resale – overseas property investors can resell their UK property to any investor of any nationality,” Loloum shared.
What to look out for
“It is important for buyers to look at the quality of internal specifications and fittings, especially the kitchens and bathrooms, as these are guarantors of higher rental yields, lower maintenance and better marketability when reselling. The layout of the apartment is also a very important aspect to scrutinise when choosing your investment property as enhanced liveability and quality standards are driving demand.
“Currently, two-bedroom apartments in the city centre, ideally furnished with a car parking space, are presenting the highest return potential. If you can find a property that is within walking distance from the major shopping areas (The Bullring, Grand Central, The Mailbox) and close to the new business areas (Brindleyplace and Arena Central), you will have a winning investment,” Loloum said.
FAST FACTS
Population: Approx. 1.1 million
Total area: 267.8 sq km
Currency: Pound sterling
GDP per capita (UK): Approx. US$39,000
GDP growth (UK): 1.8 percent
Future transport: New metro lines and rapid transit bus routes
Distance from Singapore: 10,935 km
INTERNATIONAL HIGHLIGHT
The Axium offers contemporary living in the heart of the UK’s second city.
The Axium
Windmill Street, Birmingham
Strategically located in the heart of Birmingham, just south of Holloway Head, The Axium is a new contemporary development comprising 304 apartments from 486 sq ft to 861 sq ft.
Luxuriously designed yet with practical living in mind, all the apartments feature well-thought layouts and are outfitted with quality fittings and finishes.
Getting to other parts of the city will be a breeze, thanks to the city’s efficient transportation system. A short 10-minute walk from The Axium will get you to Birmingham New Street Station. Meanwhile, the High-Speed Rail Network will connect Birmingham to London in 45 minutes.
Type: Apartment development
Developer: Top Capital Group
Facilities: Concierge service, communal terrace space, private covered car park, external CCTV
Nearby Key Amenities: Mailbox, Grand Central, Brindleyplace, Paradise, Arena Central
Nearest Transport: Birmingham New Street Station, High-Speed Rail Network
Starting Price: £172,950 (S$312,711)
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