Rental Yields in Birmingham in 2022

What is the average rental yield in Birmingham in 2022? As new developments and increased demand create the ideal buy-to-let environment, we explore Birmingham rental yields in 2022 and how the Birmingham rental market is performing.

Average Rental Yields in Birmingham in 2022

With Birmingham seeing so much growth in average prices, it’s no surprise the same is happening for Birmingham rents. The average Birmingham rental yield is 5.17% in 2022, much higher than both the UK’s overall average and London’s average (2.90%), after rents hit a peak average of £1,196 in 2021.

Birmingham remains one of the top alternatives to London for UK renters. The Birmingham market forecast for 2022 suggests it is more affordable, forecasting higher property price growth and offering much better returns. With the average rental yield in Birmingham above 5%, we’re seeing an incredible wave of demand that has supported further growth.

Rental prices in Birmingham are expected to continue rising, eventually increasing by 14% by 2026 – the highest level of rental growth in the country.

This will be primarily driven by the city’s ongoing redevelopment, more professional workers joining the market and huge events such as the Commonwealth Games and the continued progress of HS2 bringing further investment.

Top 10 Rental Yields in Birmingham for 2022

If you’re looking to invest in buy-to-let property with the intent of achieving rental returns, average Birmingham rental yields differ from postcode to postcode.

Many different factors can impact an area’s returns and while supply and demand is the primary driver, factors such as amenities, forecasted growth, local businesses and transport links all have an effect.

As a whole, Birmingham rental yields are forecast to be strong going forward and it remains one of the most competitive markets in the UK, meaning there’s plenty of potential to continue surpassing current performance. Below are the top 10 rental yields in Birmingham for 2022:

Location Avg. Price Avg. Rent (pcm) Avg. Yield
City-Centre (B1) £187,142 £950 6.09%
JQ (B3) £166,409 £823 6.13%
Edgbaston (B15) £308,020 £1,039 4.27%
Digbeth (B5) £192,221 £925 5.77%
Harborne (B17) £370,968 £995 3.12%
Perry Barr (B44) £195,133 £740 4.55%
Bordesley (B9) £148,271 £630 5.10%
Bearwood (B67) £175,731 £701 4.79%
Smethwick (B66) £160,522 £766 5.73%
Marston Green (B37) £193,812 £794 4.92%

What is Driving Rental Yields in Birmingham?

Birmingham is a popular rental market for investors because it can offer affordability, high-end living and can be adapted to multiple strategies – such as traditional buy-to-let or short-term letting.

The adoption of the ‘Big City Plan’ has helped Birmingham lead the way against other major cities – attracting waves of new professional workers, families and renters – while providing them with the amenities that they’re looking for. It’s this forward planning that has contributed to Birmingham’s average rental yield rising to 5.17%.

This meant that when London’s decline started to take place, Birmingham was in the ideal position to offer an alternative, attracting plenty of tenant demand in key growth areas. While global businesses set up shop in the second city, the allure of projects such as Arena, Paradise, Smithfield and HS2 have cemented Birmingham as a rental hotspot.

HS2, for example, would open up Birmingham to a much broader London market. This would allow London workers to live in Birmingham but still enjoy the benefits of the capital, attracting even more professionals to Birmingham’s business district and increasing demand even further. With Birmingham rental prices still much lower than London, this would benefit both London professionals and Birmingham landlords.

With 3,300 new homes needed in Birmingham each year to meet quotas, we can immediately see the potential for a rental property in the area.

Best Buy-to-Let Properties for Rental Yields

What is the best buy-to-let property for rental yields? For investors targeting a strategy specifically around rental yields, understanding the property types best suited for delivering rental yields can be incredibly helpful.

Our research suggests that studio apartments in the UK deliver the best yields in the market – 7.33% on average – but come with some caveats. Studio apartments tend to be less appealing to a rental demographic that wants space and only makes up 4% of the distribution in the market.

One-bed and two-bed properties, on the other hand, offer similar performance to each other, averaging around 5.41% and 5.26% respectively. They also make up the largest percentage of the properties on the market – around 73%.

Three-bed properties offer the lowest returns out of all the property types with an average yield of 4.90%.

For investors buying a rental property in Birmingham, this highlights the strength of a one-bed or two-bed property in the city-centre such as Lockside Wharf. They offer above-average returns and there’s flexibility available within the market.

Just remember, the figures above represent gross yields and don’t factor in running costs. Within your own investment, you may need to consider potential management costs, multiple properties and the size of the property.

What Will Affect Your Rental Yield?

Rental yields are incredibly sensitive to external factors and can change quickly.

Typically, yields are mainly driven by demand and the competitiveness of the market you’re investing in. This means that consistent, in-depth research is key and should be a major part of your wider due diligence. You don’t just want to consider rents and yields now, you need to consider them going forward.

At the same time, research external factors that could benefit your investment. Things like career opportunities, redevelopment, undersupply, transport links and tenant demographics are all factors that could impact your yield.

Tenant demographics are also very important as they will decide the strategy and property type that you opt for. While areas that have a large student population will suit a HMO investment, for example, other areas may be more suited to a 2-bedroom apartment that appeals to young professionals or sharers.

Want to Know More About Birmingham?

The latest Birmingham Investment Guide has everything you need to know about buy-to-let property in the second city. Fill in the form to the right to download your guide.