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ECONOMIC OUTPERFORMANCE
PIPELINE AND DEVELOPMENT FORECASTS
RESIDENTIAL RESEARCH
BIRMINGHAM MARKET UPDATE 2018
OUTPERFORMING MARKETBirmingham 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, while recent regeneration is underpinning a bright outlook for the one of the UK’s powerhouse cities.
Please refer to the important notice at the end of this report
Large-scale regeneration and development has contributed to outperformance in the city’s property market, with the annual growth rate for residential values averaging between 5% and 10% since mid-2015, according to data from the ONS.
The strong growth rate in prices seen in the past few years has contributed to a 45% rise in average residential property values since the post-crisis trough in 2009.
Even with this level of growth, the average price in Birmingham is around £178,000, notably lower than the UK average.
This price differential underlines just one of the key drivers of the Birmingham market – its relative affordability compared to other areas of the UK, especially those in the south of England. As the UK’s second-biggest business hub, Birmingham draws comparison with London, the financial centre of Europe.
However, when looking at residential property prices, the difference is striking, with new build development prices in some central zones of the capital ranging from £1,000 to £2,000+ per sq ft, compared to around £300 to £450 per sq ft in central Birmingham.
The city’s affordability dovetails with improvements in amenity and lifestyle, making it a destination for young workers and families alike, as discussed on page 5.
Economic outperformanceBirmingham has benefitted from a fast-growing local economy as well as large-scale city centre regeneration which is helping fuel population growth.
Economic expansion is forecast to continue, and is set to outperform the wider West Midlands during the next decade, according to Experian. Birmingham’s gross value added (GVA), a measure of the value of goods and services produced in an area, is set to climb 25.5% by 2028, faster than all other local authorities in the region.
Meanwhile, in December 2017, the city was announced as the new host for the 2022 Commonwealth Games, a move that will potentially bring further economic benefits.
DemandThe number of people living in Birmingham will rise by 171,000 to 1.3 million by 2039, according to the latest official population projections. This translates into nearly 100,000 additional households being created over the next two decades or so.
Pipeline and developmentHousing delivery data suggests that there is an imbalance between the supply of new homes and demand for housing in Birmingham.
Some 1,751 net additional dwellings were delivered in 2016-2017, down from 2,839 the previous year, according to data from MHCLG. Birmingham needs 3,577 additional dwellings every year until 2026 in order to meet demand and clear the backlog, according to official estimates.
Looking to the future, the most recent planning data suggests that around 9,700 private residential units are in the development pipeline – either under construction or with planning granted, according to data from construction intelligence provider Glenigan.
£25.3billionSize of Birmingham’s economy in 2018
(Experian)
12,108New business set up in Birmingham in
2017, second only to London, according to research by the Centre of Entrepreneurs
1stThe most popular city destination for those migrating from London in 2017
1.3mForecast population
of Birmingham by 2039
1,751Net additional dwellings delivered in 2016-2017, some way short of
forecast housing need
£
2
OUTPERFOMING MARKETBirmingham 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, while recent regeneration is underpinning a bright outlook for the one of the UK’s powerhouse cities.
Please refer to the important notice at the end of this report
Large-scale regeneration and development has contributed to outperformance in the city’s property market, with the annual growth rate for residential values averaging between 5% and 10% since mid-2015, according to data from the ONS.
The strong growth rate in prices seen in the past few years has contributed to a 45% rise in average residential property values since the post-crisis trough in 2009.
Even with this level of growth, the average price in Birmingham is around £178,000, notably lower than the UK average.
This price differential underlines just one of the key drivers of the Birmingham market – its relative affordability compared to other areas of the UK, especially those in the south of England. As the UK’s second-biggest business hub, Birmingham draws comparison with London, the financial centre of Europe.
However, when looking at residential property prices, the difference is striking, with new build development prices in some central zones of the capital ranging from £1,000 to £2,000+ per sq ft, compared to around £300 to £450 per sq ft in central Birmingham.
The city’s affordability dovetails with improvements in amenity and lifestyle, making it a destination for young workers and families alike, as discussed on page 5.
Economic outperformanceBirmingham has benefitted from a fast-growing local economy as well as large-scale city centre regeneration which is helping fuel population growth.
Economic expansion is forecast to continue, and is set to outperform the wider West Midlands during the next decade, according to Experian. Birmingham’s gross value added (GVA), a measure of the value of goods and services produced in an area, is set to climb 25.5% by 2028, faster than all other local authorities in the region.
Meanwhile, in December 2017, the city was announced as the new host for the 2022 Commonwealth Games, a move that will potentially bring further economic benefits.
DemandThe number of people living in Birmingham will rise by 171,000 to 1.3 million by 2039, according to the latest official population projections. This translates into nearly 100,000 additional households being created over the next two decades or so.
Pipeline and developmentHousing delivery data suggests that there is an imbalance between the supply of new homes and demand for housing in Birmingham.
Some 1,751 net additional dwellings were delivered in 2016-2017, down from 2,839 the previous year, according to data from MHCLG. Birmingham needs 3,577 additional dwellings every year until 2026 in order to meet demand and clear the backlog, according to official estimates.
Looking to the future, the most recent planning data suggests that around 9,700 private residential units are in the development pipeline – either under construction or with planning granted, according to data from construction intelligence provider Glenigan.
£25.3billionSize of Birmingham’s economy in 2018
(Experian)
12,108New business set up in Birmingham in
2017, second only to London, according to research by the Centre of Entrepreneurs
1stThe most popular city destination for those migrating from London in 2017
1.3mForecast population
of Birmingham by 2039
1,751Net additional dwellings delivered in 2016-2017, some way short of
forecast housing need
£
3 4
Source: Knight Frank Research / ONS House Price Index
FORECAST GVAGROWTH IN
BIRMINGHAM(2018-2028)
FORECAST GVAGROWTH IN THEWEST MIDLANDS
(2018-2028)
25.5% 23.0%
Figure 2
Birmingham has benefited from a fast-growing local economy A trend which is set to continue…
Source: Knight Frank Research / Experian GVA is a measure of the value of goods and services produced in an area
Figure 1
Strong price growth has been seen since the financial crisis But prices in Birmingham remain notably lower than the UK average…
Figure 3
Birmingham’s population is growing The number of people living in the city is forecast to reach 1.3 million by 2039
1.0
1.50
1.10
1.15
1.20
1.25
1.30
1.35
2039
2038
2037
2036
2035
2034
2033
2032
2031
2030
2029
2028
2027
2026
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
1.3m
1.1m
mill
ions
Source: Knight Frank Research / ONS
£100,000
£125,000
£150,000
£177,828
£200,000
£226,906
£250,000
2018201720162015201420132012201120102009200820072006
BirminghamUnited Kingdom
Net additional dwellings delivered in 2016-2017 (MHCLG)
1,751Housing need per annum, Birmingham (MHCLG consultation) on calculating housing need
3,577Figure 4
RESIDENTIAL RESEARCH
Source: Rightmove
Figure 8
2018-2022 Housing market forecasts
Source: Knight Frank Research
Figure 6
Growing demand in the privaterented sectorShare of households renting
Figure 5
Growth in average asking rents
Source: Knight Frank Research / ONS
200112%
201623%500
600
700
800
900
Q2
2018
Q1
2018
Q4
2017
Q3
2017
Q2
2017
Q1
2017
Q4
2016
Q3
2016
Q2
2016
Q1
2016
Q4
2015
Q3
2015
Q2
2015
Q1
2015
Q4
2014
Flat - 1 bed Flat - 2 bed
£ p
er c
alen
dar
mon
th
2018 2019 2020 2021 2022 2018-2022
West Midlands 2.0% 2.0% 3.0% 3.0% 4.0% 14.8%
UK 1.0% 2.0% 3.0% 3.5% 4.0% 14.2%
Figure 7
Birmingham residential transactions Rolling annual sales volume
5,000
10,000
15,000
20,000
25,000
2018201720162015201420132012201120102009200820072006
Source: Knight Frank Research / ONS
3 4
Source: Knight Frank Research / ONS House Price Index
FORECAST GVAGROWTH IN
BIRMINGHAM(2018-2028)
FORECAST GVAGROWTH IN THEWEST MIDLANDS
(2018-2028)
25.5% 23.0%
Figure 2
Birmingham has benefited from a fast-growing local economy A trend which is set to continue…
Source: Knight Frank Research / Experian GVA is a measure of the value of goods and services produced in an area
Figure 1
Strong price growth has been seen since the financial crisis But prices in Birmingham remain notably lower than the UK average…
Figure 3
Birmingham’s population is growing The number of people living in the city is forecast to reach 1.3 million by 2039
1.0
1.50
1.10
1.15
1.20
1.25
1.30
1.35
2039
2038
2037
2036
2035
2034
2033
2032
2031
2030
2029
2028
2027
2026
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
1.3m
1.1m
mill
ions
Source: Knight Frank Research / ONS
£100,000
£125,000
£150,000
£177,828
£200,000
£226,906
£250,000
201820172016201520142013202201120102009200820072006
BirminghamUnited Kingdom
Net additional dwellings delivered in 2016-2017 (MHCLG)
1,751Housing need per annum, Birmingham (MHCLG consultation) on calculating housing need
3,577Figure 4
RESIDENTIAL RESEARCH
Source: Rightmove
Figure 8
2018-2022 Housing market forecasts
Source: Knight Frank Research
Figure 6
Growing demand in the private rented sector Share of households renting
Figure 5
Growth in average asking rents
Source: Knight Frank Research / ONS
200112%
201623%500
600
700
800
900
Q2
2018
Q1
2018
Q4
2017
Q3
2017
Q2
2017
Q1
2017
Q4
2016
Q3
2016
Q2
2016
Q1
2016
Q4
2015
Q3
2015
Q2
2015
Q1
2015
Q4
2014
Flat - 1 bed Flat - 2 bed
£ p
er c
alen
dar
mon
th
2018 2019 2020 2021 2022 2018-2022
West Midlands 2.0% 2.0% 3.0% 3.0% 4.0% 14.8%
UK 1.0% 2.0% 3.0% 3.5% 4.0% 14.2%
Figure 7
Birmingham residential transactions Rolling annual sales volume
5,000
10,000
15,000
20,000
25,000
2018201720162015201420132012201120102009200820072006
Source: Knight Frank Research / ONS
RESIDENTIAL RESEARCH
This includes projects comprising just over
5,300 units that are currently active on site.
However, it is important to note that not all
schemes with planning will come to fruition,
and some larger schemes may take many
years to complete.
Rental marketAsking rents for a 2-bed flat across the city
averaged £860 per calendar month
in Q1 2018, up from £750 during Q1 2015,
according data from Rightmove.
The rental market is supported by demand
from students studying at the city’s
numerous universities. Birmingham
University was recently named as the 15th
best in the country in The Times Good University Guide 2018.
Birmingham was the most popular city destination for those migrating from London in 2017, ahead of cities including Manchester, Leeds and Bristol, according to data from the ONS.
The age breakdown of those arriving from London is also significant, indicating that, while a large number of those of student age are attracted to the city due to its high quality universities, a number of movers are also young workers and families.
The pace and the scale of economic growth across the West Midlands has been significant over the past few years. The level of new enterprises created demonstrates how the area is an alternative to London as a business hub.
In Birmingham alone, HSBC is currently establishing a retail banking headquarters while Deutsche Bank already has a trading floor and back 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 shortlist as the new home for Channel 4, alongside nearby Coventry.
Billions of pounds is also being spent on infrastructure investment, with new tram lines, office blocks and public squares planned as the city centre is remodelled. Two High Speed 2 (HS2) railway stations are being built in central Birmingham and nearby Solihull, which will shorten journey times to and from the capital.
London calling
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000B
asild
on
Oxf
ord
Slo
ugh
Wel
wyn
Hat
field
Her
tsm
ere
Co
vent
ryN
ott
ing
ham
Rei
gat
e an
d B
anst
ead
Leed
sC
ante
rbur
yLe
ices
ter
Elm
brid
ge
Man
ches
ter
Med
way
Ep
pin
g F
ore
stD
artf
ord
Bris
tol
Thu
rro
ckB
right
on
and
Ho
veB
irmin
gha
m
Figure 10
Birmingham is the most popular city destination for Londoners Moves from London, 2017
Source: Knight Frank Research / ONS
Figure 9
Age of those moving to Birmingham from London UK migration data, 2017
Source: Knight Frank Research / ONS
Birmingham is also well-placed to attract
and retain graduate talent. According to an
analysis of HESA data by the Centre for
Cities, 49% of new UK domiciled
graduates who were in employment six
months after graduation stayed in the city
to work in 2014 and 2015. Birmingham is
also the third best performing city in the UK
for attracting graduates who have no prior
links to the city, helping drive further
demand for rental accommodation.
Sales marketThe number of home sales taking place in the city has dipped over the last year (figure 7), reflecting a wider trend as ‘churn’ in the second-hand housing market has fallen, with less movement up and down the housing ladder.
However, overall activity in the residential market in Birmingham remains well above the levels seen in the four years after the financial crisis.
OutlookGiven the uplift in job creation and amenity in the city centre, the demand to live in Birmingham is expected to continue to grow. The improvement of transport infrastructure, both within the city and between Birmingham and other key UK cities, is likely to further augment this trend.
HS2, Europe’s largest infrastructure project, will potentially cut travel times between Birmingham and London to under one hour, increasing accessibility to jobs. In addition, this plays a part in the city’s attraction for business and manufacturing, potentially helping to underpin further economic growth.
The city has also been named as a host city partner of the 2022 Commonwealth Games, news which is likely to bring further economic and cultural benefits.
21% 7%
14%
0%
60+ 2%
35-49 15% 30-34 11%
25-29 13%
20-2
4 24
%
15-19 17%under 14 16%
50-60 3%
Knight Frank Research provides strategic advice, consultancy services and forecasting to a wide range of clients worldwide including developers, investors, funding organisations, corporate institutions and the public sector. All our clients recognise theneed for expert independent advicecustomised to their specific needs.
With thanks to Birmingham City Council for the front cover image.
Important Notice
© Knight Frank LLP 2018 – This report is published for general information only and not to be relied upon in any way. Although high standards have been used in the preparation of the information, analysis, views and projections presented in this report, no responsibility or liability whatsoever can be accepted by Knight Frank LLP for any loss or damage resultant from any use of, reliance on or reference to the contents of this document. As a general report, this material does not necessarily represent the view of Knight Frank LLP in relation to particular properties or projects. Reproduction of this report in whole or in part is not allowed without prior written approval of Knight Frank LLP to the form and content within which it appears. Knight Frank LLP is a limited liability partnership registered in England with registered number OC305934. Our registered office is 55 Baker Street, London, W1U 8AN, where you may look at a list of members’ names.
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RESIDENTIAL RESEARCH
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Knight Frank’s Global Wealth Advisory team leverages market-leading researchand best-in-class advice to provide exceptional service to our global private clients
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RESIDENTIAL RESEARCH
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FOCUS ON: STAINES-UPON-THAMES 2018
Housing market and economic overview The average price of a UK home has risen to £215,444 – a new high, according to the most recent data from Nationwide.
RESIDENTIAL RESEARCH
UK RESIDENTIAL MARKET UPDATE
“ The UK’s economic prognosis has improved in recent months, despite elements of political uncertainty.”Follow Gráinne at @ggilmorekf
For the latest news, views and analysis on the world of prime property, visit our blog or follow @KFIntelligence
GRÁINNE GILMORE Head of UK Residential Research
STEADY SUMMER MARKETS Pricing and transactions remain broadly steady overall, although large regional variations are still evident. In prime London, the number of new buyers registering interest in purchasing a new home continues to climb, although there is caution among both buyers and vendors in some localities.
Key facts June 2018UK average house prices rose by 0.5% in June, but annual growth slowed to a five year low at 2%
Prime central London prices slipped by 0.2% in May, taking the annual change to -1.4%
UK average rents were unchanged in May, with an annual growth rate of 1%
Prime central London rents rose by 1.2% in the three months to May taking the annual change to -0.1%
Regional range of house price growth, UK Annual % change
Source: Macrobond, Nationwide
Average house prices, UK
Source: Nationwide
The annual rate of price growth has slowed to a five-year low of 2%, although annual rates of growth have remained between 2% and 3% over the last 12 months. As ever, there are regional variations, with 4.4% annual growth in the East Midlands, compared to a 1.9% fall in average prices in London.
Overall transaction levels dipped slightly at the beginning of the year, but as with pricing the regional picture is mixed. In 2017, the number of home sales in the North West, North East, West Midlands and Yorkshire and the Humber was higher than in 2016, whereas in all other regions, the number of transactions decreased.
Supply of stock coming onto the market remains near record lows – but is edging upin some areas, according to the latest market sentiment survey from RICS. However, the scale of the rise is unlikely to ease current supply constraints, which is putting a floor under pricing in many areas.
Number of home sales, UK Quarterly data
Source: Macrobond, HMRC, Land Registry
0
£50,000
£100,000
£150,000
£200,000
£250,000
Jan
18Ja
n 17
Jan
16Ja
n 15
Jan
14Ja
n 13
Jan
12Ja
n 11
Jan
10Ja
n 09
Jan
08Ja
n 07
Jan
06Ja
n 05
Jan
04Ja
n 03
Jan
02Ja
n 01
Jan
00
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000HMRC Land Registry
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
40%
30%
20%
10%
0%
-10%
-20%
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
LondonHighest level of annual price growth
Lowest level of annual price growth
RESIDENTIAL RESEARCH
UK RESIDENTIAL MARKET FORECAST
“ The political and economic mood music of the residential market is a duet of Brexit and future montary tightening”.
For the latest news, views and analysis on the world of prime property, visit our blog or @kfintelligence
UK HOUSE PRICE FORECASTHeadlines May 2018UK house price growth has slowed from a peak reached three years ago, although the annual rate of change remains in positive territory
Price growth across the UK is expected to be 1% in 2018, and 14.2% cumulatively between 2018 and 2022
In London, price growth over the next five years is expected to be around 13%, although prices are forecast to dip this year
UK rental growth is expected to be 14% between 2018 and 2022
2018-2022 Forecasts, May 2018
2018 2019 2020 2021 2022 2018 - 2022Mainstream residential sales markets
UK 1.0% 2.0% 3.0% 3.5% 4.0% 14.2%
London -0.5% 2.5% 3.0% 3.5% 4.0% 13.1%
North East 2.0% 2.0% 4.0% 3.0% 3.0% 14.8%
North West 1.0% 2.0% 4.0% 4.0% 4.5% 16.4%
Yorks & Humber 1.0% 2.0% 3.0% 3.0% 3.0% 12.6%
East Midlands 2.0% 2.5% 2.5% 3.0% 3.5% 14.2%
West Midlands 2.0% 2.0% 3.0% 3.0% 4.0% 14.8%
East 2.0% 3.0% 3.0% 4.0% 3.0% 15.9%
South East 0.0% 2.0% 3.0% 4.0% 4.5% 14.2%
South West 1.0% 2.0% 2.5% 3.5% 4.5% 14.2%
Wales 1.5% 1.5% 2.5% 3.0% 4.0% 13.1%
Scotland 1.0% 1.0% 2.5% 3.5% 3.5% 12.0%
Prime residential sales markets
Prime central London East 0.5% 1.5% 2.5% 3.0% 5.0% 13.1%
Prime central London West 0.5% 1.5% 3.5% 3.0% 3.5% 12.6%
Prime outer London 0.0% 1.0% 3.0% 3.5% 4.5% 12.5%
Prime England & Wales 1.5% 2.0% 2.0% 2.0% 2.0% 9.9%
Residential rental markets
UK 2.5% 2.5% 2.5% 3.0% 3.0% 14.0%
London 1.5% 2.0% 2.5% 3.0% 3.5% 13.0%
Prime central London* 0.5% 1.5% 2.5% 3.0% 3.0% 11.0%
Prime outer London* -1.0% 1.0% 2.0% 2.5% 3.0% 8.0%
There are five main factors at play in the sales market at present.
First, the balance between buyer demand and the supply of homes being put up forsale, which differs across the country.
Certainly, the disconnect in some UK towns and cities between rising demand – on the back of stronger economic growth – and muted stock levels, is contributing to price growth.
Secondly, stamp duty remains a curb on transactions. However, in prime central London, some parts of the market are movinginto positive price growth for the first time in nearly two years. The trend is becoming particularly apparent in areas where lower prices more fully reflect higher stamp duty charges.
On a more regional basis, the North/South divide in price growth has narrowed, with the Midlands, East of England and North West
Source: Knight Frank Research NB. Price forecasts are for existing homes. Property values in the new-build market may perform differently.*Based on Knight Frank indices and boundaries, existing homes only.
seeing stronger growth and activity levels than the traditional property powerhouses of London and the South East, though large discrepancies in capital values remain.
The market’s political and economic mood music is a duet of Brexit and future interest rate rises.
Brexit will continue to create uncertainty in the short-term. And while interest rate rises will push up mortgage rates, the rates payable on home loans will remain near historic lows in the short to medium-term.
Finally, and perhaps one of the biggest factors in the market at present are the growing affordability pressures in some parts of the country – these will weigh on pricing.
In the lettings market, rental growth has been slowing for a year. However, as with the sales market, rental performance is dependent on the type of property, as well as its location.
Methodology Statement: House price forecasts are based upon time series regression analysis of relevant statistically significant macro-economic variables adjusted in-house to encompass externalities such as likely risk factors. The forecast uses the Nationwide House Price Index as a base. Our forecasts assume a Brexit deal, but with a two year transitional period. Rental forecasts based on ONS IHPRP.
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If you’re thinking of buying in Birmingham, or would just like some property advice, please do get in touch, we’d love to help.
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“ AN UPLIFT IN JOBCREATION AND AMENITY SHOULD UNDERPIN DEMAND FOR HOMES IN BIRMINGHAM. IMPROVEMENTS TO TRANSPORT INFRASTRUCTURE ARE LIKELY TO FURTHER AUGMENT THIS TREND.”
Oliver Knight, Residential [email protected]
Henry FaunAssociate Partner+971 56 1102 407 [email protected]
Tom HawkinsPartnerHead of International Project Marketing - MENA+971 56 9589 595 [email protected]
Esam SultanNegotiator+971 54 5844 [email protected]
Chelsea CoburnNegotiator+971 56 4062 [email protected]
Clementine MalimSenior Sales and Marketing Account Manager+971 56 6686 [email protected]
ECONOMIC OUTPERFORMANCE
PIPELINE AND DEVELOPMENT FORECASTS
RESIDENTIAL RESEARCH
BIRMINGHAM MARKET UPDATE 2018
RESIDENTIAL RESEARCH
This includes projects comprising just over
5,300 units that are currently active on site.
However, it is important to note that not all
schemes with planning will come to fruition,
and some larger schemes may take many
years to complete.
Rental marketAsking rents for a 2-bed flat across the city
averaged £860 per calendar month
in Q1 2018, up from £750 during Q1 2015,
according data from Rightmove.
The rental market is supported by demand
from students studying at the city’s
numerous universities. Birmingham
University was recently named as the 15th
best in the country in The Times Good University Guide 2018.
Birmingham was the most popular city destination for those migrating from London in 2017, ahead of cities including Manchester, Leeds and Bristol, according to data from the ONS.
The age breakdown of those arriving from London is also significant, indicating that, while a large number of those of student age are attracted to the city due to its high quality universities, a number of movers are also young workers and families.
The pace and the scale of economic growth across the West Midlands has been significant over the past few years. The level of new enterprises created demonstrates how the area is an alternative to London as a business hub.
In Birmingham alone, HSBC is currently establishing a retail banking headquarters while Deutsche Bank already has a trading floor and back 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 shortlist as the new home for Channel 4, alongside nearby Coventry.
Billions of pounds is also being spent on infrastructure investment, with new tram lines, office blocks and public squares planned as the city centre is remodelled. Two High Speed 2 (HS2) railway stations are being built in central Birmingham and nearby Solihull, which will shorten journey times to and from the capital.
London calling
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Bas
ildo
nO
xfo
rdS
loug
hW
elw
yn H
atfie
ldH
erts
mer
eC
ove
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Figure 10
Birmingham is the most popular city destination for Londoners Moves from London, 2017
Source: Knight Frank Research / ONS
Figure 9
Age of those moving to Birmingham from London UK migration data, 2017
Source: Knight Frank Research / ONS
Birmingham is also well-placed to attract
and retain graduate talent. According to an
analysis of HESA data by the Centre for
Cities, 49% of new UK domiciled
graduates who were in employment six
months after graduation stayed in the city
to work in 2014 and 2015. Birmingham is
also the third best performing city in the UK
for attracting graduates who have no prior
links to the city, helping drive further
demand for rental accommodation.
Sales marketThe number of home sales taking place in the city has dipped over the last year (figure 7), reflecting a wider trend as ‘churn’ in the second-hand housing market has fallen, with less movement up and down the housing ladder.
However, overall activity in the residential market in Birmingham remains well above the levels seen in the four years after the financial crisis.
OutlookGiven the uplift in job creation and amenity in the city centre, the demand to live in Birmingham is expected to continue to grow. The improvement of transport infrastructure, both within the city and between Birmingham and other key UK cities, is likely to further augment this trend.
HS2, Europe’s largest infrastructure project, will potentially cut travel times between Birmingham and London to under one hour, increasing accessibility to jobs. In addition, this plays a part in the city’s attraction for business and manufacturing, potentially helping to underpin further economic growth.
The city has also been named as a host city partner of the 2022 Commonwealth Games, news which is likely to bring further economic and cultural benefits.
21% 7%
14%
0%
60+ 2%
35-49 15% 30-34 11%
25-29 13%
20-2
4 24
%
15-19 17%under 14 16%
50-60 3%
5
Knight Frank Research provides strategic advice, consultancy services and forecasting to a wide range of clients worldwide including developers, investors, funding organisations, corporate institutions and the public sector. All our clients recognise the need for expert independent advice customised to their specific needs.
With thanks to Birmingham City Council for the front cover image.
Important Notice
© Knight Frank LLP 2018 – This report is published for general information only and not to be relied upon in any way. Although high standards have been used in the preparation of the information, analysis, views and projections presented in this report, no responsibility or liability whatsoever can be accepted by Knight Frank LLP for any loss or damage resultant from any use of, reliance on or reference to the contents of this document. As a general report, this material does not necessarily represent the view of Knight Frank LLP in relation to particular properties or projects. Reproduction of this report in whole or in part is not allowed without prior written approval of Knight Frank LLP to the form and content within which it appears. Knight Frank LLP is a limited liability partnership registered in England with registered number OC305934. Our registered office is 55 Baker Street, London, W1U 8AN, where you may look at a list of members’ names.
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RESIDENTIAL RESEARCH
RECENT MARKET-LEADING RESEARCH PUBLICATIONS
The UK Tenant Survey - 2017
The Wealth Report - 2018
Focus on: Coventry 2018
Focus on: Staines-upon-Thames - 2018
TENANT SURVEY 2017: RESULTS INVESTOR INTENTIONSSECTOR UPDATE
MULTIHOUSING 2017 PRS RESEARCH
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RESIDENTIAL RESEARCH
AFFORDABILITY DEVELOPMENT PIPELINE INFRASTRUCTURE UPGRADES
FOCUS ON: COVENTRY 2018
RESIDENTIAL RESEARCH
AFFORDABILITY SUPPLY VS DEMAND COMMUTER LOCATION COMPARISON
FOCUS ON: PARSONS GREEN 2016
RESIDENTIAL RESEARCH
FOCUS ON: STAINES-UPON-THAMES 2018
Housing market and economic overview The average price of a UK home has risen to £215,444 – a new high, according to the most recent data from Nationwide.
RESIDENTIAL RESEARCH
UK RESIDENTIAL MARKET UPDATE
“ The UK’s economic prognosis has improved in recent months, despite elements of political uncertainty.”Follow Gráinne at @ggilmorekf
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GRÁINNE GILMORE Head of UK Residential Research
STEADY SUMMER MARKETS Pricing and transactions remain broadly steady overall, although large regional variations are still evident. In prime London, the number of new buyers registering interest in purchasing a new home continues to climb, although there is caution among both buyers and vendors in some localities.
Key facts June 2018UK average house prices rose by 0.5% in June, but annual growth slowed to a five year low at 2%
Prime central London prices slipped by 0.2% in May, taking the annual change to -1.4%
UK average rents were unchanged in May, with an annual growth rate of 1%
Prime central London rents rose by 1.2% in the three months to May taking the annual change to -0.1%
Regional range of house price growth, UK Annual % change
Source: Macrobond, Nationwide
Average house prices, UK
Source: Nationwide
The annual rate of price growth has slowed to a five-year low of 2%, although annual rates of growth have remained between 2% and 3% over the last 12 months. As ever, there are regional variations, with 4.4% annual growth in the East Midlands, compared to a 1.9% fall in average prices in London.
Overall transaction levels dipped slightly at the beginning of the year, but as with pricing the regional picture is mixed. In 2017, the number of home sales in the North West, North East, West Midlands and Yorkshire and the Humber was higher than in 2016, whereas in all other regions, the number of transactions decreased.
Supply of stock coming onto the market remains near record lows – but is edging up in some areas, according to the latest market sentiment survey from RICS. However, the scale of the rise is unlikely to ease current supply constraints, which is putting a floor under pricing in many areas.
Number of home sales, UK Quarterly data
Source: Macrobond, HMRC, Land Registry
0
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Jan
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00
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450,000HMRC Land Registry
2018
2017
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LondonHighest level of annual price growth
Lowest level of annual price growth
RESIDENTIAL RESEARCH
UK RESIDENTIAL MARKET FORECAST
“ The political and economic mood music of the residential market is a duet of Brexit and future montary tightening”.
For the latest news, views and analysis on the world of prime property, visit our blog or @kfintelligence
UK HOUSE PRICE FORECASTHeadlines May 2018UK house price growth has slowed from a peak reached three years ago, although the annual rate of change remains in positive territory
Price growth across the UK is expected to be 1% in 2018, and 14.2% cumulatively between 2018 and 2022
In London, price growth over the next five years is expected to be around 13%, although prices are forecast to dip this year
UK rental growth is expected to be 14% between 2018 and 2022
2018-2022 Forecasts, May 2018
2018 2019 2020 2021 2022 2018 - 2022Mainstream residential sales markets
UK 1.0% 2.0% 3.0% 3.5% 4.0% 14.2%
London -0.5% 2.5% 3.0% 3.5% 4.0% 13.1%
North East 2.0% 2.0% 4.0% 3.0% 3.0% 14.8%
North West 1.0% 2.0% 4.0% 4.0% 4.5% 16.4%
Yorks & Humber 1.0% 2.0% 3.0% 3.0% 3.0% 12.6%
East Midlands 2.0% 2.5% 2.5% 3.0% 3.5% 14.2%
West Midlands 2.0% 2.0% 3.0% 3.0% 4.0% 14.8%
East 2.0% 3.0% 3.0% 4.0% 3.0% 15.9%
South East 0.0% 2.0% 3.0% 4.0% 4.5% 14.2%
South West 1.0% 2.0% 2.5% 3.5% 4.5% 14.2%
Wales 1.5% 1.5% 2.5% 3.0% 4.0% 13.1%
Scotland 1.0% 1.0% 2.5% 3.5% 3.5% 12.0%
Prime residential sales markets
Prime central London East 0.5% 1.5% 2.5% 3.0% 5.0% 13.1%
Prime central London West 0.5% 1.5% 3.5% 3.0% 3.5% 12.6%
Prime outer London 0.0% 1.0% 3.0% 3.5% 4.5% 12.5%
Prime England & Wales 1.5% 2.0% 2.0% 2.0% 2.0% 9.9%
Residential rental markets
UK 2.5% 2.5% 2.5% 3.0% 3.0% 14.0%
London 1.5% 2.0% 2.5% 3.0% 3.5% 13.0%
Prime central London* 0.5% 1.5% 2.5% 3.0% 3.0% 11.0%
Prime outer London* -1.0% 1.0% 2.0% 2.5% 3.0% 8.0%
There are five main factors at play in the sales market at present.
First, the balance between buyer demand and the supply of homes being put up for sale, which differs across the country.
Certainly, the disconnect in some UK towns and cities between rising demand – on the back of stronger economic growth – and muted stock levels, is contributing to price growth.
Secondly, stamp duty remains a curb on transactions. However, in prime central London, some parts of the market are moving into positive price growth for the first time in nearly two years. The trend is becoming particularly apparent in areas where lower prices more fully reflect higher stamp duty charges.
On a more regional basis, the North/South divide in price growth has narrowed, with the Midlands, East of England and North West
Source: Knight Frank Research NB. Price forecasts are for existing homes. Property values in the new-build market may perform differently.*Based on Knight Frank indices and boundaries, existing homes only.
seeing stronger growth and activity levels than the traditional property powerhouses of London and the South East, though large discrepancies in capital values remain.
The market’s political and economic mood music is a duet of Brexit and future interest rate rises.
Brexit will continue to create uncertainty in the short-term. And while interest rate rises will push up mortgage rates, the rates payable on home loans will remain near historic lows in the short to medium-term.
Finally, and perhaps one of the biggest factors in the market at present are the growing affordability pressures in some parts of the country – these will weigh on pricing.
In the lettings market, rental growth has been slowing for a year. However, as with the sales market, rental performance is dependent on the type of property, as well as its location.
Methodology Statement: House price forecasts are based upon time series regression analysis of relevant statistically significant macro-economic variables adjusted in-house to encompass externalities such as likely risk factors. The forecast uses the Nationwide House Price Index as a base. Our forecasts assume a Brexit deal, but with a two year transitional period. Rental forecasts based on ONS IHPRP.
UK Residential Market Update - June 2018
UK Housing Market Forecast - May 2018
LONDON DEVELOPMENT HOTSPOTSRESIDENTIAL DEVELOPMENT OPPORTUNITY AREAS 2018
RESIDENTIAL RESEARCH
AREAS TO WATCH PRICE FORECASTS MARKET UPDATE
London Development Hotspots - 2018
If you’re thinking of buying in Birmingham, or would just like some property advice, please do get in touch, we’d love to help.
Get in touch
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“ AN UPLIFT IN JOB CREATION AND AMENITY SHOULD UNDERPIN DEMAND FOR HOMES IN BIRMINGHAM. IMPROVEMENTS TO TRANSPORT INFRASTRUCTURE ARE LIKELY TO FURTHER AUGMENT THIS TREND.”
Oliver Knight, Residential [email protected]
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