In 2019 Should you still be investing in Birmingham Buy To Let?
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Should you still be investing in Birmingham Buy To Let?

If I were a buy to let landlord in Birmingham today, I might feel a little bruised by the assault made on my wallet after being (and will continue to be) ransacked over the last 12 months by HM Treasury’s tax changes to buy to let. To add insult to insult to injury, Brexit has caused a tempering of the Birmingham property market with property prices not increasing by the levels we have seen in the last few years.

Should you still be investing in Birmingham Buy To Let? I think we might even see a very slight drop in property prices this year, and if Birmingham property prices do drop, the downside to that is first time buyers could be attracted back into the Birmingham property market, meaning less demand for renting (meaning rents will go down).

[ Please check our wide range of houses for sale in Birmingham offer. ]

Yet, before we all run for the hills, all these things could be serendipitous to every Birmingham landlord, almost a blessing in disguise.

Buy to let Birmingham still worth?

Birmingham has a population of 1,064,063, so when I looked at the number of people who lived in private rented accommodation, the numbers astounded me ..

Birmingham – Accommodation Type and the Number of Occupiers
Owned outrightOwned with a mortgageShared ownership (part owned and part rented)Social rented (aka Council Housing)Private rentedLiving rent free

Yields will rise if Birmingham property prices fall, which will also make it easier to obtain a buy to let mortgage, as the income would cover more of the interest cost. If property values were to level off or come down that could help Birmingham landlords add to their portfolio.

Rental demand in Birmingham is expected to stay solid and may even see an improvement if uncertainty is protracted. However, there is something even more important that Birmingham landlords should be aware of, the change in the anthropological nature of these 20 something potential Birmingham first time buyers.

I have just come back from a visit to my wife’s relations after a family get together. I got chatting with my wife’s nephew and his partner. Both are in their mid/late twenties, both have decent jobs in Birmingham and they rent.

Yet, here was the bombshell, they were planning to rent for the foreseeable future with no plans to even save for a deposit, let alone buy a property. I enquired why they weren’t planning to buy? The answers surprised me as a 40 something, and it will you.

Firstly, they dont want to put cash into property, they would rather spend it on living and socialising by going on nice holidays and buying the latest tech and gadgets. They wanted flexibility to live where they choose and finally, they didn’t like the idea of paying for repairs. All their friend’s feel the same. I was quite taken aback, because buying a house is just not top of the list for these youngsters.

So, as 17.6% of Birmingham people are in the rented accommodation and as that figure is set to grow over the next decade, now might just be a good time to buy property in Birmingham – because what else are you going to invest in? Give your money to the stock market run by sharp suited city whiz kids – because at least with property – it’s something you can touch- there is nothing like bricks and mortar!

5 cool neighbourhoods in Birmingham to buy a home

Birmingham has a lot of great places where you can enjoy of an exciting night life, cultural events and fine restaurants. Some areas were already popular for that, but Birmingham is always evolving and there might be other places that weren’t on your list. This year you may want to visit these areas while looking for your dream home.

Digbeth – You can read in our blog about the ambitious plans for Digbeth with the Beorma Quarter, that will provide high-standard homes for many people. With many more projects on, such as Fabric Square and over 300 flats that will be completed this year, this is going to be one of the areas with the greatest growth.

Birmingham Smithfield will replace the old market and will include homes, galleries, museums, music venues and open spaces. There will be another development on Bradford Street, which will be a residential square.

Digbeth has traditionally been considered the artistic neighbourhood of Birmingham. If you enjoy art and cultural events you will find many venues, as well as the well-known Custard Factory.

Moseley – Moseley is fighting to keep their liberal and alternative identity. It was recently chosen as one of the best places to live in UK and it will definitely appeal to music lovers.

Because of this, you can expect to pay more for a house in Moseley than in nearby areas. The majority of house sales in there last year were terraced homes, with the average price around £204,433.

Moseley hosts a folk festival and a Jazz Funk & Soul Festival in Moseley Park. It also features the MAC (Midlands Arts Centre), which hosts a variety of theatre, dance, music and comedy performances. Also, if you enjoy food festivals, several of them are organised in Cannon Hill Park.

Kings Heath – Not far from Mosely is Kings Heath, with an independent spirit and much more affordable homes. It is a unique place for shopping with a number of boutiques, the vintage flea market at All Saints Centre, street food market on the village square and the Kings Heath Food Assembly. There are also a lot of cafes, restaurants and some live music venues such as the Hare and Hounds.

If you are looking to buy a home in Kings Heath, you will find plenty of period terraces, being also popular those near the Highbury and Kings Heath parks.

Holloway Head – If you have been reading our blog lately, you will know that this might become the new millionaire’s row. It might be hard to believe because it doesn’t look very appealing when you see it, but developers have a firm belief this area has a great potential and are building a lot of new flats.

Holloway Head is near New Street Station, the Bullring, many pubs, theatres and nightclubs. It is a superb place for party people.

The prices of the flats vary but are due to rise up. Concord House has the record with a sale for £1.8 million, although in 2015 was also sold an apartment in Clydesdale Tower for only £87k.

The Jewellery Quarter – This area will continue its process of transformation this year. More old warehouses will be converted into flats, studios and penthouses. Last year, home prices went from £66k for a studio in St Pauls Square to £690k for a loft developed by Javelin Block in Viceroy House.

Buy-to-let property used to be a highly profitable investment, but after the new measures announced by the Government to increase the taxes for landlords, many people fear that this kind of investment might not be worth anymore.

The new measures will be implemented progressively from 2017 to 2020. Once fully effective, higher rate taxpayers will only benefit from the basic rate of tax (20%), when offsetting their mortgage interest against their rental revenue.

Nowadays, for instance, when a higher rate tax payer pays 40% tax on their rental income, they can offset this with tax relief of 40% of their mortgage interest.

However, with the latest changes, these rental property owners are going to obtain a smaller income because their tax relief falls from 40% to 20%. Actually, it could happen that a few landlords got negative profit due to these new rules and their rental income resulted in a loss.

Some points against buy-to-let

If you are one of those who pay higher tax and have the intention of getting rid of a mortgage on your property, you will have to pay attention to this before committing to anything.

Another issue you should be careful with is the fact that interest rates and mortgage rates are nowadays low, but they might increase in the next few years. On the other hand, rental prices are quite high, especially in relation to income, which means that if at some point mortgages go up, landlords will have it very difficult to raise rents as well.

The property market is quite unpredictable. Right now there is a shortage of homes and, as a result, a lot of competition, which makes sale prices rocket, especially in certain areas such as London.

Whereas people who intend to buy a home nowadays are struggling because of the high prices, those who purchased one during the recession are now lucky because the value of that home is now bigger. However, with a higher home value, they will probably have to pay capital gains tax, which can be considerable.

Other options about buy to let

Despite all, if you’re not a higher rate taxpayer or don’t require a mortgage, the option of buy-to-let might still be profitable. Also, if you wish you save some taxes, it is a good thing to know all landlord costs that are tax-deductible. Some of these are ground rent, utility bills, council tax and letting agent fees.

Also, you can take an alternative to investing in property or being a homeowner. This might be increasing your pension plan by downsizing.

Anyway, whatever you choose, the best advice is to make some research on the property market and examine thoroughly the pros and cons of every option.

Interested in what you can buy in Birmingham at the moment? Have a look at our city centre portfolio. Be quick about getting your interest in as these tend to get snapped up!

Should you still be investing in Birmingham Buy To Let?
By David Price