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Why investors are watching the rise of the Midlands

Ian Boden, Sales Director, LendInvest

It’s been a rollercoaster couple of years for the world of property investment, with a succession of tax and regulatory changes that investors and their brokers have had to get their heads around.

But for all of the discussions about stamp duty, portfolio landlords and underwriting rules, the fundamentals of property investment haven’t really shifted; the challenge is still to identify which areas tenants are going to want to rent in, and the sorts of properties which will appeal to those tenants.

That’s why we produce the LendInvest Buy-To-Let Index, to dig into the data on which areas are providing the greatest return for investors and the underlying trends which may lead certain towns and cities to outperform.

One particularly noteworthy result from the latest Index has been the improving performance of towns in the Midlands. Leicester for example has had an eye-catching performance, jumping 17 spots in our ranking of the best towns for property investment to break into the top 10, primarily off the back of sharp rental price growth of more than 5%. Meanwhile Birmingham has also jumped significantly up the table, rising from 18th place overall in September’s index to 11th in the latest index.

When you talk about property investment in the UK, it is perhaps inevitable that the discussion is dominated by the performance and prospects of the capital, or of the commuter towns that surround it.

But savvy investors have been well aware of the potential for either greater returns by pinpointing towns and cities that are still growing, and the Midlands is full of them.

Birmingham is in many ways the perfect example. It is host to a number of excellent universities, which is always a great foundation for landlords. Those universities don’t just mean a steady supply of students looking for rental accommodation, but also a substantial number of graduates who look to build their post-studies life in the area as well.

But there is much more to Birmingham than simply students and recent graduates. There has been enormous investment in the city infrastructure, to the point that huge global names are choosing to set up shop there. HSBC and Deutsche Bank for example have moved their core UK functions to Birmingham, while it has also proven attractive to tech and media firms.

Then there is Leicester, highlighted as one of the best cities for growth in a report by PricewaterHouseCoopers earlier this year. This is in large part down to the very small levels of unemployment seen in the city, always an important factor for landlords when determining where to invest.

In fact that PwC report is telling for the prospects of the Midlands as a whole – of the 10 cities identified as the most improving when it comes to growth, Birmingham, Leicester, Wolverhampton & Walsall and Derby all feature.

Don’t forget too the enormous investment being pumped into the region via the Midlands Engine, further adding to the growth prospects of towns across the region.

The momentum building up in the Midlands is already attracting the attention of investors. In Crowe Clark Whitehill’s Property & Construction Outlook report from this year, the West Midlands was picked out by 19% of respondents as the best place for investment, easily the most popular region beyond the South East.

The great unknown of course is what Brexit may mean for the region. The truth is that even as the date of our exit from the European Union draws ever closer, we still have very little idea about exactly what it will mean for the nation as a whole nor for individual regions.

Nonetheless, the Midlands is filled with towns and cities with sufficiently firm foundations that they are well placed to ride out any difficulties that may lie just around the corner. Property investors looking for a solid area in which to boost their portfolio will continue to watch the Midlands closely.
Click here to download the LendInvest Buy-To-Let Index, a comprehensive quarterly analysis of the UK buy-to-let market.

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