BIRMINGHAM RESIDENTIAL RESEARCH - MARKET UPDATE 2018 - Knight Frank
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RESIDENTIAL RESEARCH
BIRMINGHAM
MARKET UPDATE 2018
ECONOMIC PIPELINE AND
OUTPERFORMANCE FORECASTS
DEVELOPMENT
OUTPERFOMING MARKET
Birmingham has one of the UK’s largest economies,
a fast-growing population and a strong pipeline of new
development. Bars and restaurants are popping up,
£25.3billion
Size of Birmingham’s economy in 2018
while recent regeneration is underpinning a bright
outlook for the one of the UK’s powerhouse cities.
(Experian)
Large-scale regeneration and Economic expansion is forecast to
development has contributed to continue, and is set to outperform the
outperformance in the city’s property wider West Midlands during the next
decade, according to Experian.
£
market, with the annual growth rate for
residential values averaging between 5% Birmingham’s gross value added (GVA),
and 10% since mid-2015, according to a measure of the value of goods and
12,108 data from the ONS. services produced in an area, is set to
climb 25.5% by 2028, faster than all other
The strong growth rate in prices seen in local authorities in the region.
New business set up in Birmingham in
2017, second only to London, according the past few years has contributed to a
to research by the Centre of Entrepreneurs 45% rise in average residential property Meanwhile, in December 2017, the city was
values since the post-crisis trough announced as the new host for the 2022
Commonwealth Games, a move that will
in 2009.
potentially bring further economic benefits.
Even with this level of growth, the average
price in Birmingham is around £178,000, Demand
notably lower than the UK average.
The number of people living in
1st
This price differential underlines just one Birmingham will rise by 171,000 to 1.3
of the key drivers of the Birmingham million by 2039, according to the latest
The most popular city destination for market – its relative affordability official population projections. This
those migrating from London in 2017 compared to other areas of the UK, translates into nearly 100,000 additional
especially those in the south of England. households being created over the next
As the UK’s second-biggest business two decades or so.
hub, Birmingham draws comparison with
London, the financial centre of Europe.
Pipeline and
However, when looking at residential development
property prices, the difference is striking,
1.3m
Housing delivery data suggests that
with new build development prices in
there is an imbalance between the supply
some central zones of the capital ranging
Forecast population of new homes and demand for housing
from £1,000 to £2,000+ per sq ft,
of Birmingham by 2039 in Birmingham.
compared to around £300 to £450 per
sq ft in central Birmingham. Some 1,751 net additional dwellings were
delivered in 2016-2017, down from 2,839
The city’s affordability dovetails with the previous year, according to data from
improvements in amenity and lifestyle, MHCLG. Birmingham needs 3,577
making it a destination for young workers additional dwellings every year until 2026
and families alike, as discussed on page 5. in order to meet demand and clear the
1,751
backlog, according to official estimates.
Net additional dwellings delivered
Economic Looking to the future, the most recent
planning data suggests that around 9,700
in 2016-2017, some way short of outperformance private residential units are in the
forecast housing need
Birmingham has benefitted from a development pipeline – either under
fast-growing local economy as well as construction or with planning granted,
large-scale city centre regeneration which according to data from construction
is helping fuel population growth. intelligence provider Glenigan.
2 Please refer to the important notice at the end of this reportRESIDENTIAL RESEARCH
Figure 1 Figure 5 Figure 6
Strong price growth has been seen since the financial crisis Growth in average asking rents Growing demand in the private
But prices in Birmingham remain notably lower than the UK average… rented sector
£250,000 Share of households renting
Flat - 1 bed Flat - 2 bed
900
£226,906
£200,000 2001
£177,828
£150,000
800
12%
£ per calendar month
£125,000 700
£100,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
United Kingdom Birmingham 600
Source: Knight Frank Research / ONS House Price Index
2016
Figure 2 Figure 3
500
23%
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Q1 2016
Q2 2016
Q3 2016
Q4 2016
Q1 2017
Q2 2017
Q3 2017
Q4 2017
Q1 2018
Q2 2018
Birmingham has benefited from a fast-growing Birmingham’s population is growing
local economy The number of people living in the city is forecast to reach
A trend which is set to continue… 1.3 million by 2039
Source: Rightmove Source: Knight Frank Research / ONS
1.35 1.3m
1.30
Figure 7
25.5% 23.0%
1.25 Birmingham residential transactions Rolling annual sales volume
1.1m 25,000
1.20
millions
1.15
20,000
1.10
FORECAST GVA FORECAST GVA 1.50
15,000
GROWTH IN GROWTH IN THE
BIRMINGHAM WEST MIDLANDS 1.0
(2018-2028) (2018-2028)
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039 10,000
Source: Knight Frank Research / Experian
GVA is a measure of the value of goods and services produced in an area Source: Knight Frank Research / ONS
5,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
1,751 3,577
Figure 4
Source: Knight Frank Research / ONS
Figure 8
2018-2022 Housing market forecasts
2018 2019 2020 2021 2022 2018-2022
West Midlands 2.0% 2.0% 3.0% 3.0% 4.0% 14.8%
Net additional dwellings delivered in 2016-2017 Housing need per annum, Birmingham UK 1.0% 2.0% 3.0% 3.5% 4.0% 14.2%
(MHCLG) (MHCLG consultation) on calculating housing need
Source: Knight Frank Research
3 4RESIDENTIAL RESEARCH
This includes projects comprising just over Birmingham is also well-placed to attract However, overall activity in the residential
5,300 units that are currently active on site. and retain graduate talent. According to an market in Birmingham remains well above
However, it is important to note that not all analysis of HESA data by the Centre for the levels seen in the four years after the
schemes with planning will come to fruition, Cities, 49% of new UK domiciled financial crisis.
and some larger schemes may take many graduates who were in employment six
years to complete. months after graduation stayed in the city Outlook
to work in 2014 and 2015. Birmingham is Given the uplift in job creation and amenity
also the third best performing city in the UK in the city centre, the demand to live in
Rental market for attracting graduates who have no prior Birmingham is expected to continue to
Asking rents for a 2-bed flat across the city links to the city, helping drive further grow. The improvement of transport
averaged £860 per calendar month demand for rental accommodation. infrastructure, both within the city and
in Q1 2018, up from £750 during Q1 2015, between Birmingham and other key UK
according data from Rightmove. cities, is likely to further augment this trend.
Sales market HS2, Europe’s largest infrastructure project,
The rental market is supported by demand The number of home sales taking place will potentially cut travel times between
from students studying at the city’s in the city has dipped over the last year Birmingham and London to under one hour,
numerous universities. Birmingham (figure 7), reflecting a wider trend as ‘churn’ increasing accessibility to jobs. In addition,
University was recently named as the 15th in the second-hand housing market has this plays a part in the city’s attraction for
best in the country in The Times Good fallen, with less movement up and down business and manufacturing, potentially
University Guide 2018. the housing ladder. helping to underpin further economic growth.
London calling
Birmingham was the most popular city Billions of pounds is also being spent on The city has also been named as a
destination for those migrating from infrastructure investment, with new tram host city partner of the 2022
London in 2017, ahead of cities lines, office blocks and public squares Commonwealth Games, news which
including Manchester, Leeds and planned as the city centre is remodelled. is likely to bring further economic and
Bristol, according to data from the ONS. Two High Speed 2 (HS2) railway stations cultural benefits.
are being built in central Birmingham and
The age breakdown of those arriving
nearby Solihull, which will shorten Figure 9
from London is also significant, Birmingham is the most popular
journey times to and from the capital.
indicating that, while a large number city destination for Londoners
of those of student age are attracted Figure 8 Moves from London, 2017
to the city due to its high quality Age of those moving to Birmingham
8,000
universities, a number of movers are from London
also young workers and families. UK migration data, 2017 7,000
The pace and the scale of economic 14% 6,000
growth across the West Midlands has 16%
r 14
de 5,000
been significant over the past few years. un 7%
91
-1 25-2
The level of new enterprises created 15 91 4,000
3%
demonstrates how the area is an 35-49 15% 30
3,000
alternative to London as a business hub.
-3
41
1%
2,000
In Birmingham alone, HSBC is
21% 7%
currently establishing a retail banking
2%
1,000
60
+
24%
headquarters while Deutsche Bank
3%
already has a trading floor and back 5 0-6 0 0
-24
Birmingham
Brighton and Hove
Thurrock
Bristol
Dartford
Epping Forest
Medway
Manchester
Elmbridge
Leicester
Canterbury
Leeds
Reigate and Banstead
Nottingham
Coventry
Hertsmere
Welwyn Hatfield
Slough
Oxford
Basildon
20
office jobs in the city. HMRC has
announced plans to move a large
number of staff to the city centre from
2020, while the city is also on the
0%
shortlist as the new home for Channel
4, alongside nearby Coventry. Source: Knight Frank Research / ONS Source: Knight Frank Research / ONS
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