Birmingham's Shortage of Homes Set to Keep Prices and Demand Buoyant

In the vibrant city of Birmingham, residential developers find themselves at a unique crossroads, presenting an exclusive opportunity to address the growing demand for high-quality accommodation in a city grappling with limited housing stock, as highlighted by Knight Frank.

Energy Performance Certificate (EPC) data, considered a reliable indicator of housing supply, indicates a decline in development during the first nine months of this year. The issuance of EPCs for new homes in the city decreased by five per cent compared to the same period in 2022, totalling just over 3,000—a significant 60 per cent below the city's annual housing target of 7,136 homes.

Birmingham has ambitious plans for numerous landmark, mixed-use projects over the next decade. Knight Frank reports 18,575 units across 85 schemes, each comprising at least 10 units, with detailed plans granted. Over half of these are schemes exceeding 100 units, including significant developments such as New Monaco on Bristol Street, Upper Trinity Street, and the Stone Yard scheme.

While house prices in Birmingham experienced a slight deceleration in 2023, slowing to three per cent from a peak in the 12 months to September 2022, the demand remains robust. The pandemic-induced "race for space" led to increased migration from London to Birmingham, boosting housing demand. Despite a moderation in demand, Birmingham's property prices continue to outpace those in London.

The construction of the High-Speed 2 rail link has been a catalyst for residential and commercial development, attracting major companies like Goldman Sachs and HSBC to establish offices in the city.

Recent data highlights a significant increase in high earners relocating from London to Birmingham, with a 26 per cent rise in the number of individuals earning over £70,000 per year in 2022 compared to 2021, according to Experian. Birmingham's overall growth is predicted to reach 3.2 million by 2034, with Oxford Economics forecasting a 16 per cent increase in Gross Value Added, surpassing the national average.

While Birmingham's economy diversifies towards life sciences, tech, and logistics, high inflation and finance costs pose challenges. Housing affordability, though less acute than in some other areas of the UK, remains a key focus.

Birmingham's student population thrives, attracting students to its five universities. The rental growth for purpose-built student housing increased by 2.1 per cent in 2021-22, according to Knight Frank's Student Property Index. Additionally, the Build To Rent sector is poised for growth, with 7,206 new homes expected to be completed by 2026, 7,354 under construction, and a further 8,196 granted full planning.

Will Jordan, Partner and Head of Birmingham Residential Development at Knight Frank expresses the city's resilience and attractiveness to forward-thinking developers and investors. With increasing migration to Birmingham from other parts of the UK, the residential sector holds immense potential to cater to soaring demand.

Anna Ward, an Associate in Knight Frank's research team, emphasizes the existing supply-demand imbalance in Birmingham, underlining the necessity to build more homes as the city's economy and workforce expand. As we approach the close of 2023, Birmingham stands as a promising frontier for those seeking strategic investment opportunities in the dynamic UK property market.