Birmingham is centrally located with easy access to London and Manchester and has a thriving commercial scene, history, tourism and a thriving residential market. It is easy to see why the second largest city in the UK is an ideal place to invest in property but which postcodes, exactly, should investors be looking at?
Buy-to-Let in Birmingham
Hello everyone and welcome to the latest in our Buy-to-Let Property Hotspot series. In today's video, we're going to be looking at Birmingham as an area, and we cover about 12 different postcodes in the video. About seven or eight of those we highlight as potential areas for... very good indicators that cover all the different data-sets, all the different metrics that we internally use in our own property investments, and when we're assessing a new area, these postcodes pass all of that criteria.
So, we show exactly what the postcodes are, exactly what data-set we tend to look at ... Everything from historic and recent house price growth, both in market values and also sale prices over the last 12 months, 5 years, and 10 years. Also sale prices, how quick properties are going to actually sell within a given location, so it can be an indication as to how buoyant the areas are. And then we'll round that up with a potential, property deal.
So, our team is working to try and find you the best property deals that we can across the country, and there's one particular postcode in Birmingham that we have a ready-to-go live project today that you can purchase and invest in if you wished to.
So, any questions, as always, don't hesitate to ask, and we'll go straight into the content.
So let's get straight into the content. So we're going to be focusing on Birmingham as we mentioned, for this Buy-to-Let Hotspot series, and just really trying to identify how and why Birmingham could be a potential place to look at for a next buy-to-let property investment, and then also, hopefully as a potential area for long-term growth as well.
Rental yield and rental income are very important. It's the main thing we focus on, but it's also good to see what the growth prospects of a given area are going to be like.
So in today's video, we focus on Birmingham, primarily, and there are certainly lots of other options out there, but Birmingham is a very large city. You can see here from a location point-of-view, it's very centrally located, so it attracts a lot of interest and a lot of demand from investors and also home-owners based on its location and proximity to many main areas.
So, from a work and commercial point-of-view, it's got lots of reasons to live and work there. As you can see, Liverpool and Manchester are to the north, Birmingham is relatively central, and then there's London to the south.
It's very close to lots of other major cities in and around the UK. It's very large in itself as an area. Second largest city in the UK and you also have very good connections, as you can see, with motorway links coming from London through to Birmingham and then going further north. So it's very well-placed.
In terms of tourism, if you go to the Visit Birmingham website tourist information, just to get an idea of what the area tends to be about, really. So you've got attractions, festivals, as you can see here. Culture. Heritage. It's a very historic town or city. There are lots of reasons to visit Birmingham from a tourist point-of-view, lots of reasons to live there from a commercial and economic point-of-view and family point-of-view as well.
And then as you can see here by clicking on the images for Birmingham ... if you were to Google Birmingham, it will give you a feel for what sort of images show up. It's lots of blends of different types of buildings. You have historical buildings, mixed with more modern designs and styles, and more futuristic kind of designs for plans and developments that are due to be created in and around the Birmingham area.
So it's very much an area that's growing currently, has historic demand and also has some very nice long-term plans for the city as well. Looks very good. Looks very positive.
So as an area, this hopefully gives you that sort of starting point as to what it looks like, but the main reason why we're looking at it is for its buy-to-let potential and to see if it can be considered as a potential buy-to-let hotspot.
Heat Maps
So, the first part of this is looking at things like heat maps.
Now, we do have a spreadsheet here which we've created that pulls all the information, in the same way as we've created for other areas. And so if you wanted to get the very quick upshot as to what postcodes are working within the Birmingham area at the moment, I go on to the detail of the data shortly, but you can see here you've got these postcodes, so B1 to B6 are looking very positive. We've highlighted those. And B15. And then also B12 as an area.
They fit all of the fundamental criteria that we've outlined as potential markers to indicate a good area. So, if you want to jump straight to that, you can certainly check out these postcodes yourself and see if there are any opportunities within there that fit your own metrics.
We've also got a project that the team has found within the postcode of B12, so if you wanted to have a look at that, you can simply follow the opt-in form below this video or on this page, and that will take you through to any of the deals that we currently have, that the team have found in this Birmingham potential area.
So, Birmingham is an area that does look good from what we can see, and there's a project here. There's a buy-to-let project that you can progress with, ready now, if you want to go down that road.
If you wanted to stick around for the data, we'll go through that shortly, and there's a couple of things that we'll cover within that mix, but essentially, from a growth prospect, the heat map is the main criteria that we're going to be starting with, just to see if the area is looking positive, if there are good signs of value within that location.
If you've not used heat maps before, a very quick insight is that it's colour-coded from dark blue, as a lower-value location, based on price points, through to dark red as a higher-value area, based on price points. So you can see these, sort of Edgbaston, Solihull, Southern Coldfield. They're sort of close, central locations. We've got some quite good high-value locations and areas there, and then further on, if you kind of scroll out, you do have some patches of darker blue.
But fundamentally, what we want to see is, if we're focusing on any area really, or any town, city or postcode, that we are close by to some of the higher-valued property prices. It's a good indication, historically, of values, potentially spilling into nearby towns and cities. So, if you were, for example, looking at a location here and you were close by to these higher-value areas, if people can't afford to live in these higher-value areas, then very often they gravitate towards locations quite close by.
So, we use the heat map as a good indication, to see what any given town or city might look like as potential values and potential for buy-to-let and long-term growth.
Birmingham has got some very good high-value locations nearby it, so in that instance, it is certainly an area that we would look at further, and it is certainly an area that we'd dig into deeper within individual postcodes.
Disclaimer
Now, in terms of the data, there are just a couple of caveats that we need to cover here. So, firstly, this isn't intended as financial advice. We're purely looking at third-party data so you can get an idea as to what we're seeing based on the websites that we use.
And we use very mainstream websites, so Mousprice, Zoopla, Wikipedia for postcodes, things like that.
So, these are data- sets that are easily accessible for free across the internet. You can access these yourselves. We're just simply showing you the indicators that we, internally, use to assess property projects for ourselves.
All properties that you might consider ... you can find a good location, but it could still be a bad property, so it's well worth doing your own research on both locations and also properties. So any property or any location that we identify in these heat maps and buy-to-let series, we would still recommend you still do your own research. It's not and isn't intended to replace any of your own research that you would do on your property purchases.
Property is risky and like any asset, can go down in value. So, there's no guarantee of growth. We're looking at historical data, so it's historic performance, past performance, and that's certainly not an indication or defined indication of what's going to happen in the future. It's just a snapshot in time as to what has happened previously, so it's historic or estimated data.
I should mention each development and property should be considered on its own merit, and this is a showcase of the research that we, ourselves, internally, carry out. And also that we get many investors talking to us about what they look at for their buy-to-lets as well.
But as we mentioned at the beginning, it's certainly not a definitive data-set, and it's certainly not definitive that this area is going to outperform any other area across the UK. We're simply looking at a snapshot in time here for Birmingham and having a look at how it could potentially be performing.
And then lastly, this is average data, so certainly you will see individual properties that can outperform this data. You'll see properties in postcodes that we aren't highlighting that can perform very well. And again, there'll be properties within these postcodes that don't perform quite in line with the average.
Postcodes can cover very large areas, so certainly outliers can skew that data. So, please, do your own research on locations. Please do your own research on areas, and hopefully, this data-set will just give you some additional information to consider within your mix of blended research.
So, to give you an insight, if this is the first video you've seen in our buy-to-let series, we have done others previously on other locations so you can see here are some other areas that we've covered.
All of these areas are covered in our VIP training as well, and we include some of them as a snapshot on the main website. And when we're looking at any given area, we're following the same metrics, so, if you've seen a couple, previously, then all of this detail that we're looking at is going to be similar, following forward.
Metrics
So, we're looking at three main colour coding systems. So we've got the area baseline, so Birmingham, here, is coded in grey.
Primary postcodes are the ones that cover all of our metrics, so four-out-of-four, they pass, and these are the metrics here.
And then secondary postcodes coloured slightly differently for ones that perform and achieve three-out-of-four.
So, the metrics we're looking at, typically, are around growth. Buy-to-let, we certainly do consider yield. That's the primary factor that we consider above everything when we're looking at buy-to-let, but that's definitely going to be property-specific.
What we want to be focusing on is area and the potential growth metrics that that area can deliver.
So, we are looking at historic growth, which is identified by heat maps. We're looking at historic market growth, both market prices, so, is there a steady overall trend of market prices going up?
We're looking for solid demand, so are property prices actually selling and achieving good sale prices?
And then also speed. Are they selling within a quick timeframe?
So all of these are the key indicators that we've seen historically as showing good trends for possible growth in a given area.
Now, you can look at other things, things like population growth, employment growth, income, things like that.
But typically these are the main metrics if we were to condense it down to just four. These are the main metrics that we've seen that supersede any others to achieve those stats that we really want to be focusing on.
So, what we'll do is, instead of going through every single individual postcode, I'll highlight one particular postcode so, B1, for example, and show you exactly the data-set and how we have typically found it and used each of these data-sets.
So, the first stage is just looking at the area, so Birmingham. Does Birmingham as a location match our criteria for heat maps?
And this certainly would do. We've got some very good high-value locations nearby. It's not all low-value areas, so that gives us some potential for growth, some potential for good prices and yields, and also good spill-over hopefully from some nice-value locations.
Zoopla
Next up: So that's using mouseprice.com, typically, that we use for that first-stage research. Next up, we're going to be using zoopla.co.uk, and that's where we're going to be identifying individual postcodes, so this is just using the normal 'For Sale' search.
B1, and then we're using the map section for this search. And instead of here, where you might initially see the map outlined, what we're looking at here is the heat section. So if you click on 'Heat', you can see the map is kind of overlaid with the blended values.
So, this is exactly the same kind of metrics we're looking for. We're looking for some dark reds, perfect. Some yellows and maybe some greens. That gives us an indication of what values we might be seeing in and around the area. Light blues are okay as well. That gives us good areas for yields, typically. And then dark blues are lower-value locations. On paper, higher-value yields, but maybe a bit less or a bit more historically, sluggish growth.
So, if it's a fully dark blue area, that's certainly going to be a red flag, and that would mean ... so, this snapshot in time, you can see here, quite a decent size kind of picture. That would be across this whole image, rather than just this street section here, for example, because we are looking at blended data, so we need to look at a slightly bigger picture.
But that certainly performs very well, and if we can change postcode here, you can see how that looks in a slightly different area of Birmingham. So if we click on B2, for example, we can then see what the property prices and values are like in Birmingham postcode B2 area. Initially, comes up just with the map section. If we click on 'Heat', again, you can see how the prices are shown in the colour-coded system.
So, again, a very good area. So what this looks like on the spreadsheet is we've allocated where all of these properties and areas are positive or not with heat maps.
I'm just going to show you B7 quickly as well because that's one that hasn't passed our internal metrics for heat map prices, and therefore potential growth. Just to show you the difference in terms of why that might be.
So it's quite close to town. You've got some very good values here, and if you were looking at this part of town, the spill-over is certainly potential from these sorts of areas. But B7 as an area is probably 70%+ lighter blue or a slightly darker blue kind of area, and then surrounding the majority of that, again, you have some greens, but typically lighter blues and some yellows further over.
But you've not got lots of values that are showing very good positive chances to spill over. It doesn't mean it's a bad area. It doesn't mean it's not going to have growth. It's just we would ideally be liking some more higher-value locations closer by, maybe some in-and-around some areas around here, a few more reds would be perfect, and that would tip it over the edge to be a certainly an area that would be worth considering.
But if you are, or if you already have properties in this postcode, that doesn't mean it's a bad area. That doesn't mean it's not going to have growth. We're not looking at local knowledge here. We're just looking at the data and what that is showing us.
So once the properties have passed the first criteria... So, Birmingham does pass the heat map positive test, for us. These postcodes do pass each of the postcode heat map area tests. These ones don't. Once it's past those, then we start looking at the data and seeing how that can start to play into the main stats that we're looking at.
Market Prices and Sold Prices
Now there are a couple of stats here that we look at: So, market prices and the sold prices, and then we have some calculations here that we've created ourselves to get some form of percentage values, and then also selling time.
So just going to start here on the market values, and we look at the last 12 months, 5 years, and 10-year change, both on market values, and then also sold prices.
So this data is very easy to get. Zoopla, house prices. We're looking at B1 postcode here, and then it's essentially this top market activity box that we're going to be looking at.
This data here will change in line with your property prices or property types, sorry, and date ranges. We don't change the property type. We're just looking at any property here. We want as much data as possible to play with.
And then we're looking at these data-sets: 12 months, 5 years, 10 years, so we start off at 12 months, and then effectively, what we've done is just taken this data, so, the value change for the market value, so how much has the market prices of property, on average, changed in B1 over the last 12 months? This gives us a pound figure, and this gives us a percentage. And then also we're looking at that same date range, but average price paid, so, what is the average price that somebody has paid, or people have paid, for properties in that postcode in the last 12 months?
And then we've effectively just populated our spreadsheet across from here.
So, we've put in columns market changes in terms of pounds, market changes in terms of percentage together, and then sold price changes in terms of pounds together as well, just to make it easy to kind of see it as a snapshot. And you can also change that data range to five years, and then we've pulled this data manually into this spreadsheet, as you can see here.
So, it's as simple as that. What that means on this spreadsheet is there's a couple of key indicators that we've taken, again, internally, as what we see as the leading indicators of historic growth and then hopefully potential for future activity going in the same sort of direction.
So, first of all, these are the key metrics that we're looking at: One, is a past for house price, using the heat maps. Two is about 18% in the last five years. We're looking for a value change. Now that's quite a specific figure, and that's not based upon any hard-and-fast rule. It's just an internal rule or metric that we've created because we tend to see properties, areas, that have below 18% growth in that five-year timeframe for market values as, sort of, struggling, slightly, in terms of historic growth when we've mapped it out over our own portfolio and other properties and test properties over a period of time. So that's the indicator that we've set.
And you can see here, this is where we'd be looking at that data. So, all of these postcodes here have passed that. There's some very good growth in Birmingham actually, compared to so many other towns and cities across the UK. It's been rapid over the last five years, in line with London and Manchester as well. They've had some very good growth, as well. You can see here, these are ... our data-set here is 18% and above. These were all 28, 27, 29%. So, some very good growth-metrics there.
Percentage of Acutal Price Paid
Next up, we're looking at a percentage of the actual price paid, so we're looking at a growth on value as well as ... So a market value, as well as the actual physical price people are paying on average from that 12-month to 5-year timeframe. And we're looking for about 5%. Now that's not going to be a 5% growth per annum or it's not going to be anything like that. It's a blended data set. We're using average prices, and it's using data from across all of this timeframe of 5 years to 12 months.
So, it's difficult to show using that data as a price-per-year because we want to keep it easy for ourselves and our team and also for yourselves to check the data. We just kind of want to use one main data set, and that's using this. This 5% here is the metric that we've, internally, effectively, set.
Now you can see some absolutely fantastic growth from this postcode, B3, 165 to 237, the average price paid. So, some very good growth there, and it's way above the typical targets we set of 5%. So that's fantastic.
So, all of these have been highlighted blue. This one, here, is just slightly below the 5% mark, 3.94. Now there has been growth. You can see here it's gone up from 125 to about 135, and there has been very good market value change in that timeframe. It's just the actual sold prices themselves haven't gone quite as high as some of the other areas.
So, this data is really looking at, as I said, a blended data-set of market values, as well as active sold prices.
Now, there are things that can really swing this change, so, a brand new build development, for example, of high-value properties, can really impact the data-set. So, outliers like that will certainly give you some changed data. So, maybe in B3, there was a large development of houses or apartments that pushed the values up of prices sold, and hence you're seeing these kinds of data stats.
Even with that, though, that still is a good indicator for local prices, local growth. So even with that, it shouldn't impact the data in a way that hopefully is going to invalidate it and still worthwhile looking at, but you just might not have that same impact in some of these other postcodes.
So, this particular postcode here, of B12, although it's not got that 5% growth in this metric that we're looking for, all these other metrics do look very strong, so, we are still looking at it and highlighting it as an area for us to consider and for our team to look at, if we were looking at Birmingham.
It's an area that we would consider within Birmingham for that very reason because it does do very well on all the other metrics. Not only that, but compared to the rest of Birmingham, its growth has been a little bit more sluggish in sold house prices, but still in-line with the majority of the metrics that we tend to look at.
So, it may be that there's potential growth as a regeneration area, here in this B12 postcode, or there might just not have been many sold properties in that timeframe. It might not be an active area. It might be more commercial. It might be more industrial. As I said, there's no local knowledge playing into this. It's just purely data-led. So there are things like that that will really impact what this data set starts to look like.
And if there's not been very strong growth over a period of time in one particular postcode, but all the other areas are very good, and B12 is looking good from a heat map perspective. For us, that's a prime area then to hopefully have some value spill over into this area. Price ranges are affordable. Yields should, therefore, be relatively strong, and the growth has been relatively stable, so, hopefully, there should be some nice growth metrics coming up in the future.
Median Selling Time
Not only that, but the median selling time is eight days. This is our final kind of metric. For this, we are looking at home.co.uk, time-to-sell analysis. You've got lots of different data you can consider here.
We're typically looking at the median, so the average time using the median date range or data set for B1 postcode is 43 days. And you can change the location here and put whichever postcode and area you want to do. So as an example, let's say, we were looking at B12. It's 45 days. If we were looking at B5, you can see it changes to 56 days. So this is just reflective of how many properties are selling within a given area, and certain areas will be more buoyant than others in terms of the number of properties that are being sold, as well.
Now the reason we use median is that it takes out, strips out, any outliers. You might have one-or-two properties that sell really quick or sell really slow that can impact this date range, especially when there is not much data to play with. So, by using a median data set, it just balances out that data that we are playing with.
And 60 days, again, there's no specific reason why you have to use 60 days. You can use any data set you want. We personally favour 60 days because, for us, that's showing us that anything that sells usually under that timeframe is a more active market. As long as you get all the other metrics right, properties right, then we should achieve some quick sale times. There should be some demand, effectively, within that location to buy properties within that space of time.
Putting It all Together
So we've put all the date ranges here, so some of these areas, so this postcode here, B7, is out of that 60-day time range. The majority, or all of the others, actually, are below that 60-day time range, which is good. But these B7 postcodes, we haven't, and B8, B9, B10, B11, we haven't done any further data on, purely because they didn't pass our first metric of the heat map section.
So, hopefully, that helps give you an idea as to what sort of data we're seeing in this spreadsheet, and fundamentally, what sort of postcodes are actively showing as potential buoyant property areas for buy-to-let. It could be potentially a good hot-spot area and a potentially a good spill-over area for growth, as B12 seems to be looking like, from the stats that we're seeing.
So we've got these postcodes here: B1, B2, B3, B4, B5, B6, B12, and B15. If we were going to invest in Birmingham now, these are the postcodes that we'd be paying a bit more close attention to, and these are the postcodes we'd be looking to source property investments in.
Now, as we said at the beginning of the video, our team has found a project within the B12 area, so if you were looking at Birmingham and do want to consider property deals, we do have a potential opportunity. You can opt-in below this video. Just follow the link, or use the opt-in form, and that should give you the full details of the properties.
Now, all of the deals that we look at within our services, we typically now work with other third parties to deliver them, so we work with one main company for our buy-to-let opportunities, and that's the company that has got these deals available in Birmingham.
They do also have other areas available, so they can chat to you about other areas if you wanted to, but they've typically got a range of different properties at any given time, but specifically in the Birmingham area, this is a postcode, this is an area that seems to be showing some nice potential for growth.
So I hope that helps. Any questions, as always, don't hesitate to ask. You can get all of these locations and the full spreadsheet showing all of these locations in our VIP training, or you can see the snapshot of this area, obviously, in this video as we've gone through it today.
I hope that helps. And certainly, hopefully, it's shown you how we tend to do some initial assessments on areas, and you can use this in any given area.
We'll be doing probably about one a month of these sort of video snapshots, and we'll be looking at new areas each time.
So the next area we'll be looking at might be Sheffield or Leeds or any area typically around the UK where we seem to be seeing some nice metrics, some good growth.
So, if you've got any recommendations, any areas you really want us to cover, just put them in the comments section below this video. That would be great. And we can certainly take it into account when we're looking to cover and assess the next potential buy-to-let hotspot location in our property series.
Once again, I hope that helps. I look forward to catching up with you soon on the next video. All the best. Take care. Bye.
Melodie Tyrer says
28/08/2018 at 9:12 pmTerrific presentation – thanks Robert!!
Robert Jones says
04/09/2018 at 11:01 pmGlad it helped Melodie 🙂