Insider Media Limited

Birmingham’s property market is facing a supply bottleneck, according to research by property consultancy DTZ.

Speaking at the firm’s Money into Property event in Birmingham yesterday, its global head of research Hans Vrensen said there is a challenge that needs to be faced.

"Grade A availability is declining and we expect that over time the Grade B stock will also come down,” he said. “We expect take up to step up over the next few years. Stable take up is burning off availability."

And this is the situation despite a lack of demand from the public sector. DTZ’s research shows that 43 per cent of Birmingham’s take up in 2009 was from the government sector. In 2010 that figure was only 8 per cent.

It was also revealed during the event attended by Insider that the West Midlands showed growth in property investment volumes for the second year running. The bulk of buyers are domestic.

"Foreign investors are coming back in but they are not fully there yet. They are still risk averse and tend to look at better known cities such as London and Paris," said Tony McGough, global head of forecasting and strategy research at DTZ.

On the thorny issue of funding for development - or rather the lack of it - McGough said that lenders are still busy dealing with distressed debt.

But whilst 80 per cent of lenders said they are finished or underway in de-leveraging prime debt, 53 per cent have said they haven’t started dealing with non-prime distressed debt yet.

"I think we will see the opening up of the secondary market in the second part of this year as lenders sort out those issues," McGough said.

Vrensen suggested we are starting to see the emergence of lending from non-bank sources such as insurance companies. "We see this as positive trend. This definitely could be part of the solution by providing additional capacity," he said.