November 16, 2022

Critical shortage of new homes in Birmingham

There is a shortage of new homes in Birmingham. This isn’t new information as the city has been struggling to meet the demand for several years now. The data confirms the lack of supply and rising demand for accommodation in Birmingham is only set to get worse. Savills reported that Birmingham needs 89,000 new homes between 2011 and 2031. MP’s urgently need to tackle the issue before the level of need moves even further out of reach. 

With very few schemes coming forward due to planning restraints, institutional investment and the cost of construction, there is less production forecast for the next 3-5 years than the previous 10. 

Why is there a shortage of new homes in Birmingham?

At a time when there is more demand than ever, Birmingham needs to deliver 149,286 more houses between 2020 and 2042, but under current plans, there are only 70,871. This means there is a shortfall of 78,415 homes. This number is changing constantly. There are many contributors to the demand for new homes, many of which are a good thing for our city overall, but we need to address the lack of new properties to meet this housing demand. 

  • Global, large-scale employers like Goldmans, KPMG and HSBC are beginning to migrate and recruit staff to the level they require creating more need for housing as people relocate. 
  • Birmingham has the highest student retention rate in the UK from our 5 universities, meaning more students than ever are finishing their studies and remaining in the city to live and work. 
  • The council’s housing stock has fallen from more than 120,000 units in the 1980s to about 60,000, largely because of schemes such as right to buy.

Plans to drive growth in Birmingham 

There is a lot going on in Birmingham right now, which is great news. However, it’s also contributing to the housing supply issue. Key infrastructures are driving growth in the city and increasing the need for accommodation as more people are attracted to Birmingham. The average cumulative property price growth in Birmingham is forecast at 19.5% 2021-2025. The average cumulative growth for the UK during the same period is 14.5%. As soon as you step foot into Birmingham, you’ll see the amount of regeneration happening. 

  • Smithfield Birmingham will bring new life to historic areas of Birmingham and regenerate the space including thousands of new homes. The £1.9bn Smithfield regeneration will be key to the wider, long-term transformation of Birmingham featuring new leisure and cultural spaces and a landscaped park. You can view the plans for the first 5 years of Smithfield Birmingham here
  • HS2 is well underway, and this will not only boost our transport links but also make Birmingham more accessible and commutable.
  • ‘Brummiewood’ is coming to Digbeth as Peaky Blinders creator Steven Knight plans a multi-million-pound media village comprising film and TV studios across 39 acres. New properties are planned for the site too. 
  • The Metro System final phases 4-6 will be underway with completion planned in the next three years. The route will interlink with HS2 and provide much-needed public transport upgrades 

Birmingham needs more homes to be built to meet the demand. But it’s not as simple as that. There are plans, consultations, and regulations that can delay the process. Even gaining access to land can take months or even years. Increased output of residential property takes time. 

The rising cost of construction 

Another contributor to the delay in building new homes in Birmingham is the current cost of construction. This affects the price of new build properties and how affordable they are. Higher building costs are reducing the affordable housing pool even further. UK Construction is generally costing 25% more now than it did two years ago. Developers have to pass on this cost in the list price of the property, or it becomes unprofitable and will not be built at all. If there are higher costs for building property or high demand, prices will rise. There is no guarantee that the price will fall back to previous levels, so for now we must assume the prices will remain going forward.

There are fundamental housing requirements that are pushing up capital values/rent in the city and this will affect housing pricing for new build properties moving forward including:

  • Government Plans
  • War in Ukraine 
  • Cost of materials 
  • Disruption following the COVID-19 pandemic

We have developments across the city and plans in place for the future. To discover more about investment opportunities in Birmingham, get in touch with our expert property investment team.