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1:00 am, December 17, 2007
Steve Brauner: Frothy market goes flat

New Year hangover means headaches for developers

Are Manchester city centre apartments still a good investment? Some estate agents and their friends in the media are saying yes, but it wasn't too hard for us to find people whose experience tells them the opposite.

Despite predictions that the number of city centre dwellers will rise from the current 19,000 to 25,000 by 2012, there are already clear indications of overbuilding.

The rental market is swamped with properties seeking tenants, agents tell us that the number of repossessions is rising and there are plenty of people who would like to sell but can't.

This is a dynamic marketplace, with new properties coming on stream all the time. Inevitably, certain developments will go out of fashion as quickly as they came in, or become less attractive when a new building next door blocks a previously spectacular view.

We're hearing screams of pain, but are they just coming from a few unfortunates who bought in the wrong place at the wrong time and at the wrong price?

The fact that one agent has 65 Beetham Tower apartments on its books and seemingly very few takers, while apartments in other once-fashionable buildings are failing to sell at auction, suggests that there are more serious and structural problems in the marketplace.

Our research suggests that units in some of the most high-profile developments are now changing hands for significantly less than the selling price when they were first released four or five years ago.

People trying to sell flats have told us that the market is extremely sluggish.

Their experiences contradict claims by some estate agents that saturation point has not yet been reached.

In some buildings, properties seem to be virtually unsaleable. This may be due to particular circumstances, but the sheer number of apartments chasing a limited number of buyers is also a factor.

Developers and investors did very well while property prices were booming but a robust housing market cannot rely purely on short term speculation. If property buyers are to embark on such a major financial commitment they need to be confident about the longer term but just now, when fear has overcome greed, they are not confident at all.

What will change their minds? More facilities for city centre dwellers, not just in terms of health and education but also more affordable food shopping, would help.

But potential buyers also need to see developers starting to do things differently.

To carry on building "em high and selling "em at a discount to buy-to-let investors will only create more empty units and more uncertainty about future prospects.

Besides which, it's questionable whether many investors still have the appetite.

In too many cases, supposedly high-end developments have disappointing interior finish. Potential buyers are bound to wonder: was this built to live in or just for someone to make a quick turn?

City centre living has made a massive contribution to Manchester's regeneration by bringing empty buildings back into use, creating a vibrant nightlife and helping to attract a pool of skilled labour.

Those benefits will be put at risk unless confidence can be restored.