HS2 has sent demand for city centre homes soaring in Birmingham, years before the first service is due to arrive, according to a new report from JLL.
The property specialists’ research team’s analysis of the regional residential market reveals that the growth is being driven by the under-35s; often young professionals working in the city, but also people relocating from London – and overseas students.
Simon Horan, JLL’s Birmingham-based director who leads its new residential business across the Midlands, said:
“We knew demand for city centre living here was far outpacing supply, but when you look behind the numbers, it is intriguing to see that the trend is clearly being driven by HS2,” he said.
“When you consider that the first bullet train isn’t due to be in service between London and Birmingham until 2026, it underlines just how savvy young professionals are, and how highly they rate efficient and high-speed transport links.
“Roughly three-quarters of city centre residents in Birmingham are 35 or under, and because supply is lagging, the typical monthly rent for a prime one-bedroom flat is now just over £1,000 a month, and £1,600 for a two-bedroom property.”
The findings come from JLL’s overview of the regional housing market, Find the Gap, which looks to identify the best niche opportunities for investors and developers.
It also revealed that average house prices in the West Midlands rose 5.3% in the year to Q3 2018 – to £198,000, driven by shortage of supply. Across the UK, the increase was just 3%, whilst in London, typical prices fell by 1.7%.
Horan says there’s been “minimal development activity” in Birmingham’s urban residential market for several years, but is confident that’s about to change.
“In the next five years, we will see two major schemes driving the sector, the £1.5 billion Birmingham Smithfield – formerly the city’s historic wholesale markets, but now one of the UK’s largest urban regeneration projects – and the £550m athletes’ village for the 2022 Commonwealth Games,” he said.
“Smithfield will deliver some 2,000 homes, and the village around 1,400. Construction on both schemes is due to start during 2019, which will ultimately reduce the pressure for new homes, but also highlight Birmingham as a strong investment opportunity.”
Horan further highlights the imminent arrival of Birmingham’s first purpose-built private rented sector (PRS) schemes, which are due to complete this year.
“Several major projects from different developers are scheduled to come on stream in 2019, which is great news for home-hunters, but as the city’s PRS sector finally lifts off, it will in turn put pressure on buy-to-let landlords to improve the quality of their offering,” he added.
Nick Whitten, JLL’s UK director of residential research, expects that supply will also receive a boost from the government’s housing delivery unit.
“Homes England is beginning to ramp up its activity, predicting that it will help to build 300,000 homes pa by the mid-2020s, and we see a golden age ahead for this organisation,” he said.
“We also predict that digital construction techniques will finally move into the mainstream, and that business information modelling (BIM) will transform the relationships between supply chains, contractors and developers.
“It’s difficult to believe that Sir John Egan’s ‘Rethinking Construction’ report highlighted the future importance of collaborative IT back in 1998, but we believe BIM’s time is finally here.”