The Budget impact on Birmingham City Centre

Our immediate thoughts are that the further likely constraints to the supply of private rented accommodation caused by the 2% lift in Supplementary Stamp Duty for second home & investor purchasers will keep upward pressure on rents for the private rental sector. With some 70% of the market taken by investment buyers we may see a consequent weakening of overall sales prices, especially in those blocks dominated by Buy To Let owners as vendors look to absorb these additional purchasers’ costs to encourage the sales.

Zoopla, the portal,  recorded pre-Budget that some areas were seeing a four-fold rise in instructions from second homeowners concerned about Capital Gains Tax rises, and this office echoed some of this rise with the further concern from our clients on this subject plus the Renters Rights Bill shortly to come through Parliament ,strengthening tenant protection. Notwithstanding that CGT didn’t change significantly the wish of those clients to exit the market remains but we may find the forecast of a continuing strong lettings market & weaker investment sales market will mean that some of this supply re-enters the lettings market in the coming months.

The appeal of the City however remains, and Birmingham City Centre continues to hugely improve and has become very much sought after by overseas investors amongst others who have been attracted away from London by good rental yields & strong anticipated forecast growth in the underlying prices . Many developers of the larger taller blocks have become used to successfully selling apartments early off plan however the impact on demand of the increased tax remains to be seen. The comfort for these developers of preselling their larger buildings to bulk investment companies has been enormous unlocking the construction programmes. These bulk firms then are subsequently selling the individual flats onto smaller overseas based investor buyers .In recent years these blocks though have hardly touched the local market as sales,but hit the market as rentals once completed. We will inevitably now see more of this stock, some of which is very well located, coming back into the local market for sale for owner occupiers, widening the choice for those looking for upper floor city views.

For smaller developers, building for those looking for City homes, the market and outlook will continue to be stable. The price pressure inevitably will reflect the location & uniqueness of the product. Locations like the Jewellery Quarter continue to have solid demand from owner occupiers.

Finally for first time buyers in the City the nil rate of Stamp Duty will revert to £125,000 from the current £250,000 exemption meaning almost all new city centre buyers will now pay some tax on their purchases in 2025. Whilst frustrating this is unlikely to affect demand from that sector. The outlook of stability in medium term interest rates is already attracting property purchase decisions & this is likely to continue.