Last month the UK celebrated ‘Freedom Day’ marking the end of national Lockdown measures, as the nation begins taking steps towards a return to normality. The Covid pandemic precipitated a period of uncertainty affecting all aspects of life and business that was unparalleled in recent history. Projections for the human and economic toll varied widely, with the most pessimistic forecasts predicting widespread unemployment and the devastation of whole sectors of the economy. Thankfully it is clear that the UK has weathered the Covid storm relatively well in terms of pioneering vaccination distribution, protecting jobs, and being well placed to be a global leader of economic recovery. Confidence in such a recovery is grounded by comments made in recent weeks by the CBI (Confederation of British Industry), the IMF, and the Bank of England, all of whom have released bullish forecasts of a surge in consumer spending and business activity that will mean ‘the rate of growth will outpace all the UK’s major competitors, taking the economy back to pre-pandemic levels of activity by the end of the year’.
Whilst precise estimates vary, the consensus in their projections is confirmation of the cause for optimism. The CBI predicts 2021 growth of 8.2%, and 2022 growth of 6.1%. The IMF forecasts 5.3% growth in 2021 and 5.1% in 2022. Finally, the Bank of England raised its estimate for 2022 growth from 5% to 7.25% – the fastest pace since the second world war. It is also becoming clear that concerns that the withdrawal of the government furlough job protection scheme would spark a ‘cliff edge’ downturn are seemingly unfounded, as ‘the proportion of UK workers who are reported to be on furlough has fallen from 20% in late January 2021 to 7% in late May 2021.’
There is therefore every reason for property investors to be confident in the UK economy and consequently the UK housing market. Indeed, during the pandemic, house prices have risen at the fastest pace for more than a decade. We at Prosperity forecasted such a rise, as Covid uncertainty meant fewer people brought their properties to market – effectively reducing supply. This coincided with the nation accruing over £140 billion of ‘accidental savings’ due to inactivity during periods of Lockdown, significantly increasing spending power and demand.
With the economy and the housing market in seemingly robust form, and with consumer and investor confidence returning, where should those seeking buy-to-let opportunities look to secure the best returns? We feel there is one city ideally placed to capitalise on the ‘new normal’ of a post Covid climate. Birmingham.
This sentiment is grounded in fundamentals, understanding of the regeneration and investment underway, and importantly – an appreciation for the changes in society that Covid has triggered. One such change is the transformation of work due to digitisation and online connectivity. Whilst some predicted that workers wouldn’t return to traditional office based work, we believe that the more important trend is the redistribution UK business activity away from a purely London centric model. Businesses have come to realise that they do not need to be based in central London in order to operate effectively, and that there is an opportunity to reduce the vast costs of commercial property in such a location. This trend was already underway, with companies such as HSBC relocating their retail banking HQ (and several thousand staff) from Canary Wharf to Birmingham’s Arena Central business district. Their move was guided by cost effectiveness, access to top talent, and an appreciation of employee quality of life. The exorbitant costs of living in London can be contrasted with the relative affordability of Birmingham. This may be why Birmingham attracts more people leaving London than any other UK regional city, and why Birmingham is home to more international companies than any city outside of London.
Neil Rami, Chief Executive of the West Midlands Growth Company, recently commented that “Birmingham – and the wider West Midlands – is standing on the cusp of a new golden age of development. With the likes of global banking powerhouse Goldman Sachs about to open their doors in Brum, the post industrial landscape for the former ‘workshop of the world’ is a prospect to be relished.”
For those who have not yet visited Birmingham the scale of transformation is hard to convey. The city core has been completely rejuvenated by sweeping improvements to the public realm, the connectivity offered by the new tram system, and the creation of a vast unified business core ranging from Snow Hill to Brindley Place. Rami stated that there are “clear signs of confidence” across the West Midlands post-pandemic. You only have to look across Centenary Square. There’s £1 billion worth of commercial property development within the square mile. We are in a more confident place because we (the city) have proven that we can deliver on our promises.”
Finally, the timing of the reopening of the UK economy has proven inadvertently fortuitous. Many of the vast city centre projects are coming to completion just as the global economy comes back online. If you were to visit Birmingham today you would find a city unrivalled in its potential to bounce back and help Britain lead the post covid recovery. This prospect of growth is attracting businesses and residents to the city centre, increasing demand in a city where property supply is limited. Those positioning themselves now will be well placed to benefit from Birmingham’s rising status as a truly global centre of business.
Content by Samuel Richards