Is the rise in city living paying off for smart investors?
City living is experiencing a renaissance and it’s the perfect time for savvy investors to take advantage. As more people choose to leave the capital for a better quality of life in regional city centres, Birmingham has quickly become the top destination for those leaving London.
Investing in a regional city such as Birmingham represents a more affordable opportunity than investing in the capital, especially for smart investors that might be looking to diversify their portfolio. Property investment is an excellent way of providing security, particularly for retirement. In a recent study by leading UK property developer SevenCapital, property was found to be the top investment product for investing in the future and topped the charts for ‘aspirational investments’.
As living costs increase, from food prices to utility bills, it’s vital that people look to create an alternative income stream to secure a comfortable retirement.
These regional cities are now some of the most desirable places to live, offering all locality, amenity and lifestyle options that a young professional or family could ever need. City streets are filled with in-vogue cafes, bars and restaurants, heavily populated by the younger and more affluent demographic that has defined the rise of regional destinations such as Birmingham, Manchester and Liverpool.
Whereas people were once content with working in the city and living out in the suburbs, commuting is becoming a thing of the past. An increasing amount of people are looking at moving back into these urban areas, with many city centre populations doubling over the last 20 years or so.
Whether this is down to increased inward investment in city cores, a changing attitude towards renting or a combination of both, there’s no doubt it's having an effect. For example, between 2005 and 2015, the population of Birmingham increased by 163 per cent.
And one of the best things about these increases for the property market is that demand is sky high. As these more affluent young professionals look to work and play in the city, they’re increasingly looking for a place to live in the heart of the action. Residential undersupply and tenant demand is steadily climbing across the UK, and subsequently so is the potential for rent increases.
Already, experts are forecasting a 15 per cent rise in rents by 2023.
It helps that a large portion of the demographic mentioned earlier are not just looking for a roof over their heads. A recent report by JLL into West Midlands residential trends found that:
“The importance of good design and high-quality specification is becoming more apparent. Renting is fast becoming a lifestyle choice for many and developers need to be aware of this more discerning demographic. Renters are looking for more than just location and they are willing to pay extra for the right product.”
Birmingham is home to a number of global businesses such as HSBC and Deutsche Bank, forming the largest business, financial and professional services (BFPS) hub outside of London. This means a large and talented pool of around 123,000 working professionals are looking for quality apartments with the luxuries and services standard apartments cannot deliver.
Take for example, the rise of luxury apartments being twinned with similarly luxurious hotels and offering tailored hotel services for residents. Most recently seen with One Hyde Park in London and the recently launched St Martin’s Place in Birmingham, a first of its kind for the city, this type of private, superior service is what the fast-paced young professionals of the future are looking for.
Increasingly, many of these tenants will be sharers from the professional sector, looking to find an enhanced standard of living without compromising the affordability of splitting the rent. This means space and specification are at a premium, particularly residences that can sleep two and still have plenty of living room.
So, for smart investors, owning a spacious quality residential unit in the city centre with this kind of extra value is a huge opportunity to build a strong rental income on top of the capital growth that comes with a market forecasting a 15 per cent increase in property prices in just two years.
Andy Foote, Director at SevenCapital, believes: “Property is currently one of the best ways to accumulate wealth. Smart investors understand the power of inward investment and how it can affect property values in an area.
“As thousands of young professionals and families migrate to Birmingham, on top of excellent inward investment, quality residential developments in the city centre are in high demand and are highly likely to experience substantial capital growth over the coming years”.
SevenCapital has pioneered the return of city centre apartment living in Birmingham over the past ten years.