UK’s Birmingham is stealing the hearts of Chinese property investors

Look over your shoulder, London.

Birmingham, Britain’s second-largest city by population, is seeing a surge in interest from Hong Kong and mainland Chinese investors whose traditional go-to market has been London, rental agents said.

Located about 202km (126 miles) northwest of London, Birmingham is wooing over these investors with its splashy new infrastructure, affordability and better rental income return.

“Hong Kong buyers’ interest in Birmingham started building around two years ago … Previously, it was pretty much just London, which has become much more expensive over the years,” said agency and consultancy Savills’ Hong Kong director, Gavin She, whose team sold around 100 UK flats last year.

Some of these buyers are also looking to Birmingham as a better source of rental income.

“They just want to own a property and rental income, so they will consider Birmingham because the price bracket is affordable. In Birmingham, it costs HK$2 million (US$250,000) to HK$3 million an apartment, whereas in Hong Kong it costs HK$10 million to HK$13 million, and in London it is HK$7 million to HK$10 million,” She said.

Birmingham has also been appreciating: the average residential property in Birmingham went up 6.9 per cent in May this year compared to the same month last year, at £180,320 (US$230,000), according to the UK Land Registry. That compared to an average 0.4 per cent decline in the price of London residential properties to £478,853 over that period.

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Carrie Law, chief executive of Chinese agency Juwai.com, which last year launched an online platform to sell international properties to mainland Chinese buyers, said the number of enquiries received by her firm for Birmingham properties surged 65 per cent year-on-year in the first five months of the year.

“Two-thirds of our buyers in London are purchasing for their own use. But in Birmingham, only a quarter are doing the same,” she said, adding it reflects buyers’ expectation of Birmingham’s potential as an investment market.

Stanley Cheung, head of sales and projects at Hong Kong-based real estate agency and developer FMI, which is selling one- to three-bedroom flats at a Birmingham project called “The Curve” to Hong Kong people, said prices of the units have gained around five per cent in the past year.

“This is quite in line with Birmingham’s average annual price gain of around four per cent in the past few years,” he said. “Some 70 per cent of our buyers are investors, while the rest mainly buy the units for their kids studying in the city.”

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The rise of interest in Birmingham, renowned for its rich industrial heritage as the birthplace of the world’s first steam engine in the 18th century, lies in its government’s effort to encourage regeneration of old districts and large corporations’ recognition of its potential for lowering office costs.

“Historically, Birmingham was quite an industrial and bleak place. But there has been a huge amount of [inner city] regeneration, with a big railway station revamp and a new shopping centre,” said Mark Elliott, head of international residential at Savills.

“More investment, reaching billions of pounds, is expected in new infrastructure, dining, shopping, entertainment and residential space, and that is what has been attracting big companies,” Elliott said.

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The Birmingham city council published a development blueprint in late 2016 for the redevelopment of 14 hectares of land near the city’s centre, envisioning 300,000 square metres (3.23 million square feet) of new building floor space, 2,000 new homes, involving some £500 million of investment.

Another major factor driving investment interests in Birmingham is the high-speed railway under construction.

That railway, the London-Birmingham express line, is targeted to be completed by the end of 2026 and will slash the journey time between the cities from 81 to 49 minutes. A phase two extension will see the service reach Manchester by 2033 to cut travel time from 128 to 68 minutes.

Global bank HSBC announced in 2015 it would move the head office of its UK non-investment banking operation from London to Birmingham by the start of next year.

The operations will be moved into a newly built 210,000 square-foot building in downtown Birmingham that can accommodate up to 2,500 staff.

“It is a lot more affordable for businesses and its employees to work and live there,” said Elliott, adding it is similar to lender Citi moving its Hong Kong headquarters in 2016 from Central to Kowloon East to lower costs and improve the working environment for staff.

Accounting and advisory firm PwC also announced 18 months ago that it would take up all the 150,000 square feet of office space at the new One Chamberlain Square building under construction in downtown Birmingham to house its 1,400-strong team in the city mid 2019, and potentially accommodate an additional 1,000 staff.

Around 6,000 people moved from London to Birmingham in the 12 months to mid 2015, rising to around 6,400 in the 12 months to mid 2016, according to reports by the BBC and Guardian based on an analysis of data from the UK’s Office of National Statistics.

In both periods, Birmingham was the top destination for people migrating out of London to other parts of the UK.

“To us, Birmingham is a lot more exciting than Manchester, because it is much cheaper … it’s not seen as much developed and it is closer to London,” Elliott said. “It is a city on the way up yet very affordable … whereas London is very beautiful and special but very expensive.”