Birmingham, is located in the heart of one of the most active property market regions within England and Wales, witnessing some 29,569 property sales throughout the West Midlands so far in 2023 – that’s over 9% of all property transactions. It’s a promising city for property investment.
In a nutshell – why invest in Birmingham property? Average property rental yields are a healthy 8% and the capital gain for the last 12-months stands at just shy of 6%.
Aside from the small issue of Birmingham’s council, which serves more than 1 million people, being declared bankrupt in September 2023 due to a budget shortfall of £87m for the current financial year, there’s a lot to like about investing in Birmingham.
Here’s some more reasons why you should consider Birmingham.
Factors influencing property investment decisions in Birmingham
The property market of the big city of Birmingham is as diverse and dynamic as its culture. From student accommodation to residential areas, every facet impacts investment decisions.
Population growth drives demand
Birmingham has a diverse population growing by 13,000 in 2023, and is home to some 76,850 students across its five main universities. Future population growth predictions of 0.82% annually will further drive demand for housing. With a thriving job market and a vibrant cultural scene, it attracts people from various backgrounds and age groups, contributing to the demand for residential properties.
A strong correlation also exists between proximity to educational institutions and property demand. Areas like Selly Oak, home to a large student population attending the University of Birmingham or Aston University show this trend distinctly. The university’s influence on local house prices has made it an ideal location for buy-to-let investments targeting students.
Birmingham’s strong student community contributes significantly to high rental demand in certain areas. A smart investor will look at these factors holistically when deciding where’s the best place to buy property in this city of opportunities.
Being located within easy reach of major city business districts can significantly boost both property price and rental yield. It’s no wonder that modern apartments around Birmingham City Centre are attracting young professionals seeking short commutes.
Birmingham’s regeneration plans
Birmingham’s Big City Plan, a 20-year master plan aiming at transforming various parts across the city centre area plays a significant part too. Areas subject under these regeneration plans such as Digbeth – where iconic spots like Custard Factory reside – have witnessed considerable uplifts in their average property price recently because investors foresee potential capital growth from ongoing development projects here. Infrastructure upgrades linked with HS2 will likely give a boost to property values in the vicinity, offering an additional reason for savvy investors to consider Birmingham as a viable buy-to-let hotspot.
A strong city economy generates good household incomes that supports property investment
Birmingham is the second-largest city in the UK and is known for its diverse economy, with key sectors including finance, manufacturing, technology, and healthcare. The city’s economy is robust and diversified, generating estimated average annual household incomes of £51,600.This is £7,640 more than the England average, which helps create rental price stability for property investors.
Birmingham’s booming economy, combined with an increasing demand for rental properties, makes it an ideal location for buy-to-let investments. A trend confirmed by Google searches for “property investment in Birmingham” skyrocketing by 129% over the past four years.
Impact of HS2 on Birmingham’s property market
The introduction of HS2, the high-speed railway, is rarely out of the news in Birmingham and has had significant impacts on the local property market. With reduced commuting times to London, it has double-downed on presenting itself as the alternative home for commuters.
Top Areas for Buy-to-Let Investment in Birmingham
Birmingham is a vibrant city with diverse property options. It’s not just the bustling city centre that offers potential; areas like Selly Oak, Sutton Coldfield, and the Jewellery Quarter are hotspots too.
Spotlight on Selly Oak
Selly Oak stands out as a prime spot for buy-to-let investors due to its high demand from students. With close proximity to both the University of Birmingham and Queen Elizabeth Hospital, rental yields here often exceed the UK average.
This area isn’t only popular among students but also young professionals looking for modern apartments within an easy commute to Birmingham City Centre. The strong student presence contributes significantly to this area’s high rental values, making it an ideal location for investment properties.
Discovering Digbeth & Highgate
Digbeth & Highgate are up-and-coming areas that offer promising returns on buy-to-let investments. Both boast residential spaces like flats and houses amidst green landscapes yet still retain their industrial heritage charm at places like Birmingham Jewellery Quarter.
The planned regeneration plans around Digbeth promise further growth potential in the coming years, which makes these locations more attractive than ever before. On top of all these benefits, they’re already showing strong signs of rising house prices while maintaining solid rental yields above national averages thanks largely due to large populations living nearby such as those attending Aston University or working in the business district part of the Big City Plan initiative by local government bodies across the West Midlands region where the future looks bright indeed.
How to finance property investment in Birmingham
If you’re looking for finance options for a Buy-to-Let (BTL) property to seize a property dea opportunity, there are several options you can consider, depending on your financial situation and requirements. Keep in mind that the availability of these options may vary depending on your creditworthiness, the property’s location, and other factors.
Mortgage or remortgage
If you already own a property and have equity in it, you can consider remortgaging it to release funds for a BTL property purchase. Alternatively, you can apply for a BTL mortgage specifically designed for property investors. A new BTL mortgage typically takes around 10-weeks to arrange, so if you’re seeking a fast solution then this might not be the best solution. You might be better speaking with your existing mortgage lender and see whether they’re able to offer a suitable product either by way of a remortgage, or if that looks to be too costly you might want to explore a second charge mortgage that sits behind your existing mortgage.
Bridging loans
Bridging loans are typically large short-term loans designed to bridge the gap between buying a property and securing a long-term financing solution. They are far quicker to obtain than traditional mortgages, with some being arranged within days – not weeks, but come with higher interest rates. Bridging loans for Birmingham property purchases are suitable if you need financing for a property purchase quickly and plan to refinance with a mortgage later.
Personal loans
Personal loans are unsecured loans that can be used for a variety of purposes, including property investment. While they are relatively quick to obtain, they may have higher interest rates than secured loans, the loan amount may be limited based on your creditworthiness and they’re not usually sufficient in size to purchase property. That being said, if your purchase short-fall is less than £20,000 a personal loan may be useful.
Peer-to-peer lending
Peer-to-peer lending platforms connect individual investors with borrowers. This can be a faster way to secure financing, but interest rates may vary depending on the platform and your creditworthiness.
Crowdfunding
Real estate crowdfunding platforms allow multiple investors to pool their resources to finance property investments. This option can provide quick access to funds, and you can participate as an investor or a borrower, depending on your needs.
Business loans
If you have a business structure for your property investments, you can explore business loans from traditional banks or online lenders. These loans may be available for purchasing or refinancing BTL properties.
Joint ventures
Partnering with another investor or a property development company can provide quick access to financing for BTL properties. This option often involves sharing both the financial and operational responsibilities.
Itn any case, it’s essential to carefully assess the terms, interest rates, and associated costs of each financing option, and consider your long-term investment strategy.
Consult with your financial advisor to ensure you make informed decisions about financing your property investment that aligns with your goals and risk tolerance. Crucially, have a clear plan and financial projections for your BTL property investment to maximise your chances of success.
Future prospects for Birmingham’s property market
Birmingham’s property sector is constantly developing, without any sign of abating. The city has an exciting future with many growth opportunities.
With the Big City Plan now being half-way through its 20-year timeline, Birmingham has already transformed into a world-class city centre, and there’s a lot more to come.
This initiative includes significant regeneration projects aimed at breathing new life into older parts of the city like Digbeth and Highgate, sparking interest from buy-to-let investors who see potential in these areas.