Flats frenzy fades but future looks bright

Sep 18 2007 by David Bartlett, Liverpool Daily Post

On the second day of the Daily Post’s week-long look at the property market, David Bartlett reports on Liverpool city centre’s apartment market

TEN years ago, the number of people living in Liverpool city centre could be counted in the hundreds, now there are almost 20,000. The popularity of the central Liverpool market may have grown astronomically from a virtual zero base in the 1990s, but there are signs it has been and will continue to be hit harder in a market slowdown than the traditional housing sector.

As reported in yesterday’s Daily Post, the Merseyside housing market is showing signs of a slowdown and the apartment market has been the worst hit, with flats in Chester and Wirral actually losing more than 5% of their value year-on-year.

The number of apartments sold between April and June in the L postcode area has plummeted almost 30% on the same period last year.

And prices grew by a paper-thin 0.29% compared to 5.7% across the whole residential market for the L area.

This should come as no surprise, say estate agents, believing it is a natural lull, which has been compounded by higher interest rates and a lack of first-time buyers coming into the market. “The market is in for a period of consolidation after a rapidly rising market,” said Paul Sutton, of Liverpool-based Sutton Kersh estate agents.

“It will review itself and establish a medium, and that is happening at the moment.

“We have also had interest rate rises which were eventually going to slow the market down, it was almost inevitable.

“It will give demand a chance to catch up with supply.”

The pace of development has been so quick in recent times that between 2002 and 2006, about 3,600 apartments were created in the city centre, a rate of 2.5 per day.

“A lot of schemes were produced for people buying off-plan for two or three years hence,” said Mr Sutton. “This is where some of the problems have arisen. That market has now flattened.

“There was so much supply in such a short period.”

A special report compiled for the city last December, but only recently released, states that planning permission is in place for another 7,000-plus flats, most of which were due to be built by 2011.

However, as recently as this month, developer Iliad abandoned plans to build a 27-storey residential tower next to Lime Street Station.

Lengthy delays caused by a dispute with shop owners who were being forced to sell up to make way for the regeneration scheme meant building costs had rocketed.

Northern Irish developer Braidwater, which opened a city office in 2002, has also started to concentrate on areas outside the centre as a new area to pursue growth.

THE company behind the award-winning Cinnamon development, in Henry Street, is now concentrating on housing projects.

“We have seen the investment market change and the ripple effect of the regeneration in the city moving out into the suburbs,” said Pat McGinnis, development director of Braidwater.

“Liverpool is fast becoming a very desirable place for people to live and work. Subsequently, as prices have risen, offering well-designed property at the right price within easy access of the city has become increasingly important and what we believe the market here is crying out for,” added Mr McGinnis.

The market may have moved away from the heady days when apartments changed hands a number of times before being finished, but it is seen as a result of the fledgling market becoming more mature.

Donna Cooney, director of KMC Residential, said developers were now having to pitch their apartments at owner occupiers because there were not as many short-term investors around any more.

“People are demanding a higher specification as owner- occupiers want a better quality of product,” she added.

The demand to live in the city centre has not dried up, said Mrs Cooney, as her agency’s letting book is extremely busy, but it is simply a problem of affordability.

“Demand is tremendous for rented property. As an agency, we are seeing more demand than supply, at the moment we can’t keep up with demand.”

According to Mr Sutton, there are a number of investors who cannot be bothered with the hassle of renting out their flats, preferring instead to keep them empty but in pristine condition and sell them in five or six years after the market has risen.

But, contrary to commonly-held views that many apartments are left empty, Liverpool’s vacan- cy levels are around half of those of Manchester or Leeds, accord- ing to research for the council.

The latest available data, up to April, 2006, showed vacancy levels of 12% in Liverpool.

Despite falling sales and only marginal price increases, the future for the city centre apartment market is quite bright, argue estate agents.

For example, the student accommodation sector is a lot more advanced than other cities.

The council is now actively monitoring the migration of students from the suburbs to the city centre to make sure it does not have an adverse impact on the rest of the market.

* IN TOMORROW’S Daily Post: A report on the Capital of Culture’s effect on the property market.

davidbartlett@dailypost.co.uk

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