A lot of people seem to stay away from new builds, and as an experienced property consultant of 30 years, I would like to see what people think of this sort of proposal and detail why is does not represent a good investment?
The developer in question has a track record of 15 years. They have already completed thousands of new builds. They are given contracts to help regenerate urban areas in major cities, such is their reputation. They retain some of their properties for their own income and now run structured loan notes based on their own assets and income. The developer is thus very secure.
As an example of capital appreciation, on their last major Birmingham development, investors that bought off plan realised up to 59% capital growth on the value of the property they bought on completion of the project. So, capital appreciation is as good as it gets. The projected rental values increased by similar levels; hence the projected yield went from 5.3% to 8.7% on a 1 bed flat and 6.2% to 8.9% on the 2 bed flats.
They run their own rental programs, some with guaranteed income rates. They do monthly payment plans during the build term to help people pay deposits. Some developments allow you to pay up to 30% back to them via the rental income rather than mortgage.
They pick towns and cities where large corporations have head offices and such like, so they know the employment rates are high and rental properties in demand. They also try to pick locations close to essential transport links (HS2) or as close to a major shopping centre areas as they can.
They always price at around 10% below current market values for the post code they are building in, so that right away on launch you can be assured you have bought at a good price. The leaseholds are up to 250 years.
For buyers who pay at least 35% upfront deposit, they do free furniture packs, free legal costs and pay your stamp duty on some of their developments.
Special offer examples.
Lump Sum Deposit Incentive ACTIVE FOR APRIL ONLY
2 year Rental Guarantee with 7% Net Yield, No Service Charge, No Ground Rent, No Management Fee’s* ACTIVE FOR APRIL ONLY
These can be turnkey investments where you can, as shown above, make very good capital growth between launch price and completion price and have a fully managed property delivering you a very good income yield.
Property investors, landlords and owner-occupiers should all be looking to the north for the best property investment opportunities for the future.
Manchester will lead UK cities with the most significant increase in sales prices and rental growth over the next five years. This is according to JLL’s recent Living With 2020 Vision Regional Forecasts Report.
Across the UK housing industry, the report says there will be stronger price growth and more transactions in 2021-2022. This is partly due to the greater political and economic certainty we saw at the start of 2020.
From the end of 2020 through 2024, Greater London, the north-west of England and the east will see the most growth, says the report. There, property sales prices could rise by 17%, 16.5% and 16.4%, respectively. Regional cities in particular could see some of the most significant amount of growth.
Manchester leads the way
JLL believes Manchester will see the largest increase in sales prices over the next five years, up by 17.1%. This is markedly higher than the national average of 14.8%. The report also predicts Manchester will rank highest for rental growth at a 16.5% increase.
The city’s growing economy and rising population are big reasons behind this growth. A Stone Real Estate report recently named Greater Manchester as the most lucrative new-build property hotspot in the UK. The north-western area has seen a huge amount of growth and development in the last few years. Nevertheless, the city’s property market is set for another record year with rafts of new developments due to complete.
As Greater Manchester’s population continues to rise significantly, the city region still has room for growth in the rental sector and property market. Manchester is now classed as the best city in Europe for business in 2020/2021, according to a Financial Times Report. This means more businesses and young professionals could be on their way to the city.
As more people come to Manchester, demand in the rental market is likely to increase. This will continue to provide lucrative opportunities for landlords and investors in the coming years.
Other property hotspots in the north of England
Leeds and Liverpool are also continuing to evolve as strong UK property investment hotspots. Both areas have a number of developments currently in the pipeline. Property sales prices in Liverpool could increase by 13.1% over the next five years, while rental growth could rise by 14.8%, says JLL.
Recently named the most profitable city to become a landlord in the north of England, Leeds is expected to see prices rise by 13.7% and rental growth by 14.2%. Both of the cities’ economies and populations are likely to see significant growth in the next couple of years. As a result, forecasters expect a boom in the regions’ property markets, bringing forward rewarding investment opportunities.
As numerous cities in the Northern Powerhouse are set for an exciting future with a significant amount of development and regeneration in the works, the property markets in the north will continue to thrive. And the region is likely to be home to a plethora of profitable investment choices for investors and landlords across the next five years.
Birmingham, the UK’s “second city” has a lot to offer for businesses, investors and individuals alike. What makes it a property investment hotspot – and where should you invest?
The area in the centre of the UK has become known as the “Midlands Engine” in recent years. This is thanks to new investment and initiatives taking place there, backed by businesses, local authorities and Local Enterprise Partnerships (LEPs). It is also one of the most exciting parts of the country to invest thanks to its booming property market and economy.
Birmingham is arguably at the heart of this. With an estimated 1.4 million residents, its population soared by 163% between 2002 and 2015, according to Centre For Cities data.
Below, we look at some reasons why it’s at the top of the list of targets for property investors right now.
1. UK’s second largest business hub
Birmingham is home to a growing number of national and international businesses. Outside London, it is now the UK’s second largest business hub. Recently, British Telecom (BT) opened a new office in the city; a 17-storey building which will house 4,000 employees. This forms part of the company’s plans to bring improvements and consolidation to its working locations across the country.
Birmingham also became the base for 2,000 HSBC members of staff last year, while the particular area where BT’s new office is based is already home to HS2 Ltd, KPMG and Barclays.
Adding to the expanding talent pool in the city, PricewaterhouseCoopers, one of the “big four” accounting firms in the UK, has just moved 2,000 members of staff into new offices at One Chamberlain Square. The firm plans to expand its employee count in the area to 2,300 by the end of this year, adding to the 10,000 staff who already work outside London.
Kevin Ellis, chairman and senior partner at PwC UK, says the firm plans to add a further 1,000 roles in Birmingham by 2021, and the Birmingham office move marks the largest property investment for the firm outside London to date.
2. Record high residential transactions
Earlier this month (March 2020), Knight Frank research showed Birmingham had had a record year for residential land and investment transactions in 2019. The report showed that £289m had been transacted by the company’s Residential Land and Capital Markets teams over the year. This marks the highest amount ever recorded by Knight Frank.
More activity from developers and housebuilders was notable over the past 12 months. The firm registered an additional 4,187 dwellings that were built in 2018-2019. This is a 33% rise from the previous year, the highest increase in 15 years.
“Momentum is certainly building, and Birmingham and the wider region is no longer an emerging hub – it’s an established location in its own right,” said Mark Evans, head of Regional Residential Development at Knight Frank.
“We’re seeing increasing levels of interest from overseas investors as well as domestic buyers. This positive sentiment is creating an increased appetite from developers to not only acquire good quality land, but an urgency to launch their existing schemes to market to meet demand.”
3. Build-to-rent sector booming
Transactions in Birmingham’s private rented sector (PRS) totalled £326.7m last year. Over the next decade, CBRE predicts more than 10,000 additional renting households will live in the city. This is why Birmingham is a major target for build-to-rent investment.
Birmingham has the largest concentration of build-to-rent accommodation outside London. The city’s huge population of private tenants is now being served by purpose-built rental homes with added facilities, services and amenities that don’t always come with traditional buy-to-let.
Stuart Eustace of CBRE said: “CBRE’s analysis identifies three main factors influencing greater demand for rental accommodation, including locations with higher percentage of population aged 25 to 34, high numbers of students, and the relative size of the economy.
“Birmingham scores highly in each of these areas. Furthermore, there is good rental growth in the city, making it attractive for investors and developers.”
4. Young population
Birmingham is one of the youngest cities in Europe with nearly 40% of residents under the age of 25. As well as students, the city attracts huge numbers of new graduates looking for work and young professionals.
As this demographic is still the most likely age group to rent rather than own, rental demand is high. This ties in with a major rise in the number of businesses that are now based in Birmingham. More moves are expected in the future as the talent pool in the city continues to enhance.
For young people, Birmingham has a lot to offer. It is a metropolitan city, with world-class transport links and infrastructure, as well as cultural and social highlights. It is a top choice for huge numbers of young people looking for an alternative to London, which is more affordable and can offer a better quality of life.
5. Central location for travel across the UK
The city is ideally located for travel across the UK and beyond, making it a prime investment location. It is served by major motorways, a busy international airport and one of the most used railway stations in the country at New Street.
Recent investments have further improved the city’s transport options, including a £600m transformation of New Street station. There’s also a new £12m city centre interchange on Moor Street Queensway. Midland Metro Line 1 Extension received £129m of investment recently, too.
Birmingham is at the heart of the planned High Speed 2 (HS2). Once built, this will reduce journey times to London to just 45 minutes. The current timeframe for the first phase is 2028-2031. After this, phase two will significantly shorten the time it takes to travel further north to Edinburgh, Glasgow, Newcastle, Leeds and Manchester. The estimated completion date is 2035-2040.
Where to invest
If you’re thinking of buying property in Birmingham, there are a number of key areas to think about. This may depend on whether you will live in the property yourself, or rent it out.
Central Birmingham – The heart of the city has been the target of some major investment and renovation projects in recent years. Transport has vastly improved, as have the cultural and commercial sectors. Many young professionals in particular will favour living right in the centre of the city.
Jewellery Quarter – The jewellery quarter can achieve competitive yields for investors, as it is another area in very high demand. It is a unique, trendy destination within walking distance of the city centre, and house prices there are currently on the rise.
Perry Barr – The Commonwealth Games are coming to Birmingham in 2022. In preparation, Perry Barr is already seeing huge investment. It will be home to one of the biggest sporting venues for the games, as well as the athlete’s village. As the regeneration progresses, property demand and prices will likely rise.
South Birmingham – There are a number of suburbs to the south of the city that are attracting attention. This includes the likes of Edgbaston, Selly Oak, Harborne and Moseley. They tend to be more popular among professionals who want to live outside the hustle and bustle.Further to this, some students also choose to live in these areas.
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Earlier this month, Prime Minister Boris Johnson confirmed that plans to build HS2 would go ahead. Here’s how it might affect house prices.
Plans to connect London to the Midlands and north of England via a high-speed rail link have once again been given the green light by the government. The controversial proposals have been under debate after the projected costs for the scheme had more than doubled, while the time frame has seen yet another extension.
However, the latest affirmation for HS2 is being hailed as a hugely positive step for the UK by its supporters. The new line will shorten travel times between the capital and the rest of the UK, boost capacity, create new jobs and reduce the impact of the existing north-south divide across the country. The government also says the line will increase output and boost the country’s economy.
HS2 is currently the largest infrastructure project in Europe, and its implementation will no doubt affect the economies of the areas it passes through. House prices in these locations will almost certainly be influenced by the new line over the coming years – and to some degree this impact is already being felt.
What are the plans?
The proposals remain largely the same as they were before Boris Johnson’s latest announcement, but with slightly extended timeframes. Phase one, connecting London to Birmingham, is now due to complete between 2028 and 2031, and will reduce journey times between the cities to just 52 minutes. Phase two is then expected to complete between 2035 and 2040, and will see the connection extend from Birmingham up to Manchester, Leeds and hopefully beyond.
The following representation was published by the BBC:
What about house prices?
How the HS2 project will affect house prices will depend on the location of the property in relation to the new route. Ultimately, any major improvements to transport in an area are likely to boost its attractiveness to prospective residents, and as a result this will push up house prices.
The effects have already been seen in many areas just from the promise of the future railway line. In Birmingham, a number of major regeneration and property investment projects are currently underway, and many investors have cited HS2 as part of their reason for backing these projects. Those who invest now are expecting major house price appreciation over the coming years as HS2 comes to fruition.
In an analysis by the Guardian, it takes examples of how past infrastructure projects have affected house prices. When the M40 was extended from Oxford to Birmingham in 1991, house prices in nearby Warwick increased, according to the report, because the town was now within easier commuter distance of the city.
Crossrail in London is another good example. Despite delays, properties along the line have already doubled in value since 2008, even through the financial crisis, when the new line was given the go-ahead. According to Benham and Reeves, this is expected to grow by a further 4.7% between now and 2021.
According to the Guardian report, properties within a 10 to 15-minute walk of stations along the Crossrail line are expected to see house prices rise by between 30% and 60% over the construction period.
However, on the flip side when looking at HS2, properties that are very close to the new line could see depreciating value, according to Property Road. It says homes within 500m of the line could see house prices harmed in the short-term because of disruptive building works as well as increased traffic levels in the area during construction. This is something to bear in mind when selecting a property close to HS2.
Places to invest
Birmingham is the first place set to benefit from the new HS2 line. Not only will the project itself create new jobs in the area, but a number of major firms have already begun to open offices in the city ahead of the transport improvements.
With the promise of better accessibility, house prices are expected to increase in the area as more people choose to live and work there. For property investors and homebuyers alike, the sooner you make an investment in the city, the more likely you are to see house price appreciation as the HS2 project progresses.
When the second phase comes in, cities such as Manchester, Leeds and Nottingham will come into its remit, slashing travel times to the capital. Similar to Birmingham, these cities have also seen more businesses open offices there, attracting a bigger talent pool and more residents.
Even more peripheral towns are expected to be boosted by HS2, as the plans will also include improvements to existing lines. If you’re looking to buy away from a major city, in a place where house prices could see a boost, it’s worth keeping an eye on areas that are within easy travel distance of the new line.
Birminghams landmark residential skyscraper. Contact us for more information and we can keep you up to date with projects close to the new HS2 line.
For property investors and developers looking for the next area ripe for regeneration, the north and Midlands are the first port of call.
Recent research ranks Birmingham as the council areas offering the highest amount of potential space for regeneration by investors. The city and surrounding suburbs currently have a total of almost 16,000 of empty buildings comprising 8,086 residential dwellings and 7,622 commercial properties.
UK fibre broadband specialist Glide has identified a total of 617,527 empty residential and commercial buildings during September alone across the UK.
The north is ahead of the rest of the UK, claiming five of the top councils where investors could find opportunities to reinvent empty space.
Liverpool is in second place after Birmingham with 15,339 empty buildings, followed by Manchester, Leeds and Bradford.
UK has nearly half a million empty properties
The top five cities all located in the north account for 10% of the total number of empty homes, which the study revealed to be 448,246 across the UK. Liverpool also has the highest number of empty residential properties, with 11,073 sitting unoccupied
Regions that have been hit most by economic and political uncertainty may now see investors looking to capitalise on regeneration schemes and mixed use development.
Glide’s research found that there are a total of 172,217 empty business units across the UK, which perhaps suggests a huge potential for investment. Bradford’s council area accounts for 4.5% of the total number of the UK’s unoccupied buildings. Birmingham has the second highest number of empty commercial properties (7,622), followed by Leeds (4,528) and Liverpool (4,266).
Jason Lloyd, head of residential at Glide said: “The research has revealed the high number of empty properties and businesses across the UK, particularly across some of the major northern Council areas.”
“But whilst it is troubling to see so much wasted residential and commercial space, it does represent a clear opportunity for developers, and hopefully this study will help prospective investors pinpoint where there is the most potential for growth.”
For expats, owning a UK property for rental income or the security of having somewhere to live if they want to return home is an attractive proposition. However, applying for a UK mortgage when you live abroad is not as simple as a regular mortgage application.
Expat mortgages are less cost-effective for lenders since the Mortgage Credit Directive (MCD) was introduced by the European Commission in 2016. For borrowers paid in a foreign currency, it means lenders cannot use their automated affordability checks. Ultimately this has increased the burden of administrative and regulatory monitoring of foreign exchange rates resulting in fewer mortgages being available to the expat market.
As an expat, you should expect the mortgage criteria and application process to be more complicated, and the available mortgage products to be more expensive than if you were applying for a regular UK residential mortgage.
Buy-to-let from abroad If you want to buy a property to generate rental income while you live and work abroad, borrowers will need a “buy-to-let expat” mortgage, but property purchased to be your primary residence will require a “residential expat” mortgage.
To apply for either, borrowers will require a substantial deposit (ideally held in a UK bank account), evidence of the deposit’s source, proof of residency (for the past three years) and proof of income for a residential mortgage; for a buy-to-let mortgage, borrowers will be assessed on their expected rental income.
Consideration should also be given to the repayment currency. MCD means that lenders must monitor exchange rates to ensure foreign currency loans remain affordable for the borrower, and some specialist lenders have an “approved currency” list.
Benefits of an expat mortgage
The fall in sterling means that it’s currently cheaper for international buyers to purchase property in the UK. Expats looking to invest in the UK have to save less for a deposit because they’re getting more Sterling for their foreign currency. Plus, as the mortgage repayments will be made in Sterling, they work out cheaper too when they revert back to their earning currency.
Expats seeking to buy a rental property will find that as long-distance landlords they can take advantage of specific mortgage products and join the HMRC’s non-resident landlord scheme which exempts them from UK income tax. In addition, having a buy-to-let property is a great way of maintaining a UK credit rating, which means securing UK borrowing in the future will be easier.
An expanding market
Andrew Sadler, senior business development manager at Ipswich Building Society, said: “By far the biggest hurdle for expats is the lack of choice when it comes to mortgage providers, with many of the high street lenders seeming reluctant to get involved due to the perceived risks and challenges involved…
“This underserved area of the market is where we and other smaller lenders really come into our own, with our ability to manually underwrite cases in-house and look at the details more carefully.”
And it seems that lenders might finally be seeing the opportunities in this neglected market. Skipton International recently launched a remortgage deal for the British Expat and Foreign National Market, and Tipton and Coseley has announced that it is considering expanding its expat mortgage offering to include residential properties and foreign income loans.