UK-based buy-to-let investors keen to take advantage of attractive yields offered by Birmingham-based investment properties are being priced out of the market by an influx of international capital. Far East investors in particular have turned their sights on the UK’s second largest city, attracted by a combination of the UK property market’s reputation as a safe haven for capital preservation and some of the strongest yields in the country.
The result, reports The Times, is that local buyers, both residents who want to buy a home, and domestic buy-to-let investors, are finding initial deposit requirements and selling prices have risen to levels above their financial reach.
Birmingham’s recent regeneration of previously industrial and run-down zones in the city centre and surrounding areas has seen a huge volume of new, upmarket apartment buildings come to market over recent years. The rental market has also been strong, boosted by the youngest population of a major city anywhere in Western Europe. 40% of Birmingham’s population is under the age of 25 and the city has become the most popular relocation choice for those leaving London in search of a more affordable cost of living.
The developers building the swathes of new apartments designed to be let to successful young professionals have tapped into the growing demand for a Brummy-home for capital from the Far East. Many new developments are specifically marketed to foreign investors and some exclusively so. Enticing brochures herald the rebirth of Birmingham as one of Europe’s greenest cities, noting the impressive piece of trivia that the city is home to more miles of canal than Venice and featuring images of iconic landmarks such as the ‘Bullring’. Promises of ‘almost guaranteed’ rental yields are a fixture of brochure and agent pitches.
Hong Kong buyers are reportedly the most active market with investors from mainland China, Singapore, Qatar, Dubai and Oman also featuring heavily. Birmingham buy-to-let developments are heavily marketed at property investment exhibitions in the Far East by both local and UK-based agents painting a picture of rental demand so high many apartments are let the same day they are purchased. The pitch is clearly working with reports of up to 100 investment properties at a time being snapped up by wealthy buyers.
While a boon for the developers, there are concerns that the number of apartments being bought by foreign buyers could be creating a false market by artificially pushing prices above the level the underlying local market can sustain long term. There have already been a string of reports of buyers from the Far East who have invested in similar regeneration projects in Manchester and Liverpool being burned.
Encouraged by a seemingly endless queue of international investors, developers have focused on high-end rental apartments. However, at some point the market for this kind of property became oversaturated and as supply outstripped demand, some developments haven’t been completed or those that have been are sitting vacant with the ‘guaranteed’ rents being asked pricing out local tenants. The scale of similar development now taking place in Birmingham suggests that there is a danger a bubble could form.
Whether or not Birmingham’s current market for upmarket apartments in regeneration areas is sustainable is a question that will only be answered several months or even years from now. However, what is already sure is that the influx of largely cash buyers from the Far East means local residents and property investors are often unable to compete and are struggling to buy themselves.