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'There are just so many apartments in town, competition is too fierce,' says Jim Medway

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1:00 am, December 17, 2007
Nightmare on Oldham Street

'Nobody wants my apartment'

By Simon Binns

For Jim Medway, Manchester city centre living has become a financial nightmare. The self-employed artist was forced to go back to teaching part-time after his flat remained stuck on the market for more than a year with no sign of a buyer.

“I've pretty much given up on it, to be honest,” he said. “Very few people had looked at it, even though it's near to all the shops and bars.”

He is not alone. Even in some of Manchester's most high-profile developments, apartments have lost value since they were built.

A flat in No 1 Deansgate which sold for £400,000 in 2002 was recently repossessed for £280,000, according to a city centre estate agent.

And another in the Hacienda Apartments, which sold for £290,000 when the development was built four years ago, was repossessed and sold for £210,000. Repossession valuations are generally 10-15 per cent below market value.

Sarah Capper, manager of city centre estate agent Apartments of Manchester, said that some newer developments, such as Beetham Tower and No 1 Deansgate, have proved to be bad investments. Older developments, such as Deansgate Quay, which was built in 2000, are also suffering.

“Deansgate Quay was one of the first high-specification, well located residential developments in the city, but people are now finding that their investment is worth nowhere near as much as they paid,” said Capper. A buyer paid £145,000 for flat 4 in Deansgate Quay in March 2006, but the same property changed hands for £162,500 in October 2003, according to www.houseprices.co.uk.

There are at least eight new high-profile skyscraper developments at various stages of the planning process in Manchester and Salford. If all were built they would bring a combined total of 3,700 apartments onto the market.

"I just want rid'

This prospective flood is unwelcome news for some unhappy city centre residents already struggling to sell their existing properties.

Jim Medway thought his Oldham Street apartment would sell “in weeks”. More than a year later, he has been forced to look for rental tenants, unable to sell up in a crowded market despite dropping the price of his property by £5,000 to £135,000.

“Nobody is looking,” he said. “There are just so many apartments in town, competition is too fierce and people don't want to buy an older flat. I just want rid of it.”

In the same building, 24 Oldham Street, Paul Southworth is having similar problems. His flat has been sitting empty for six months as he struggles to find a buyer or tenants - a situation that has cost him £3,500 so far.

“I've been down £640 a month through the mortgage, since it was put on the market in May,” he said.

His apartment is currently on for £125,000 - £10,000 less than Medway's, despite only being one floor below.

“I've had two buyers pull out, because they've seen something else,” he said. “There's so much on the market to try and compete with, it's an absolute nightmare.”

Shepherd Gilmour is advertising 50 apartments for sale in Beetham Tower, ranging from £150,000 to £500,000, and has a further 15 available for rent.

The agent has two one-bedroom properties of around 600 sq ft for sale, both on the 35th floor. One is valued at £224,950, and has had its price reduced twice, while the other is available for £35,000 less, at £189,950. Number 2804 Beetham Tower, a 500 sq ft, one-bedroom apartment, which is now available with Shepherd Gilmour for £200,000, was sold for £227,000 in March.

A member of staff at the agents told Crain's that many flats in the tower were now worth at least ten per cent less than when they were first released.

“A lot of investors are losing 20,000 on the initial valuation,” he said. “Worse still, some remortgaged the properties soon after they bought them and enjoyed a lavish lifestyle until the market hardened recently, and now they still have the debt and not as much equity.”

Greedy
Capper, of Apartments of Manchester, said: “Developments that rely on profile tend to be bad investments. We've got an 800 sq ft two-bedroom apartment on the first floor of Deansgate Quay without parking for £189,950, and it has been on for a year. Even if it sells at that price, the investor will lose £20,000, though the value is nearer £165,000.”



At a Countrywide Properties auction in Haydock on December 6, the leasehold of Apartment 132 in the City Gate development on Blantyre Street sold for £115,000. In December 2004, the leasehold on the same apartment sold for £202,500 - a £77,500 drop in value in just three years. Also at the same auction, Flat 103 in No 1 Deansgate failed to sell at a guide price of £250,000 for the second month running.



Capper said: “Developers got greedy. Now when they are offering 20 per cent discounts to investors buying in bulk or off-plan, they are actually giving the true valuation. But people buying most single properties from agents are getting ripped off.”



One developer, Dandara, disclosed recently that it had taken a decision to delay starting any further apartment developments in Manchester. Sales director Hugh McGuinness said recently that were 100 flats still unsold at its 600 unit Spectrum scheme.



However, Liz Hill, residential sales manager at Jordan Fishwick, said that there were still reasons for buyers to show interest in the city centre.



“There are some good bargains out there and demand is still there, so if you do your homework, you can get a good deal,” she said. “We're hopeful the market will pick up next year.”







COMMENTS? sbinns@crain.com