The Debate: Is the city’s flats market at saturation point?

Dec 11 2007 by Liam Murphy, Liverpool Daily Post

JUST a few days ago, a city centre apartment in Liverpool sold for a “knock-down” price fetching half of what it cost three years ago. The two-bedroom flat in the original Beetham Tower had been sold for £206,500, in May, 2004, but at auction last week went for £101,000.

For many, this was a sure sign the property boom – which had seen tens of thousands of square feet of apartments built in the city – is over.

The sale also came as the Bank of England confirmed the widely expected decision to cut the base rates, with many mortgage lenders passing on the saving in a bid to head off a slump in the property market.

Economist Peter Stoney, honorary senior lecturer at Liverpool University, predicted that there would be more properties being sold at knock-down prices.

And he told the Daily Post that the cut in interest rates was not enough to reverse falling property prices.

But estate agents have taken a more bullish approach and have even advised it is a good time to buy, predicting the market would be moving back up again as early as next year.

James Kersh, from Merseyside’s Sutton Kersh estate agency, said: “If you do have the cash, there is plenty on offer and plenty of bargains.

“There are wide expectations that values will move up towards spring, 2008, because the market in Liverpool is still under-valued.”

Property developers themselves said the market is in a phase of “correcting itself”, and Dougal Paver, of Paver Smith PR, who represents a number of developers such as Downing, Maghull Group and Merepark, cautioned against worrying too much.

So, today, the Daily Post asks: Is the city flats market at saturation point?

Yes: The Case For - Cllr Paul Brant, deputy Labour leader

A more hands-on council is half the planning battle

AT LEAST two construction sites in the City Centre for residential flats are ominously quiet, with partly-constructed buildings without any cranes or construction workers present.

As developers don't like to see serious amounts of capital tied up for no reason, we can reasonably conclude that investors in the City are reappraising the development economics of city centre projects.

In the last few years, we have seen thousands of new city centre flats being constructed on the back of the national property speculation frenzy.

Developers would speak of flats being bought off-plan by “Buy to Let” investors from London or the Irish Republic.

Easy credit and the never-ending spiral of property prices seemed to make such investments a one-way bet.

Anecdotal evidence shows that the flats market in the city centre has rapidly slowed and maybe stalled in recent months, with properties for sale now being on the market without any appreciable interest and some vendors withdrawing property from sale to see how the next few months develop.

The Daily Post reported in April that up to 35% of city centre flats were currently unoccupied; this fact alone showed that the council had failed to use its planning powers to ensure that sustainable mixed communities were being built in our city centre.

The international credit crunch was always going to squeeze some of the demand out of the market as mortgages became harder to find.

Rising interest rates meant that yields for investors have fallen over recent years and the phenomenon of buyers bidding high assuming that prices would continue to rise (a classic sign of a bubble) has now disappeared.

We can now anticipate a correction in the market for city centre properties – the age of “irrational exuberance” is now over.

A slowing or gentle drop in property prices would not be all bad for the city. Too many of our young people are now priced out of the entry level of the housing market due to the speculators.

Liverpool has seen increasing numbers of empty properties purchased as “buy to leave” while waiting lists and homelessness have increased.

The lack of diversity in the new supply has led to it being particularly vulnerable to a downturn in this one sector.

Much of the city’s social housing stock was built between the wars is approaching obsolescence. In London, the Mayor uses planning powers to ensure that 50% of new-build properties are affordable, here the Lib-Dem Council has refused to use those powers; consequently we have flats standing empty.

The council needs to start acting like a strategic housing authority for the city, otherwise our long-term economic regeneration will be jeopardised; hopefully, recent events will act as a wake-up call.

No: The Case Against - Frank McKenna, Downtime Liverpool in Business

Buying a flat is now more realistic and attractive

OVER the last few years, Liverpool has been rebuilding itself as a city.

The regeneration that has been taking place is based on future projections for city living that at this moment in time haven’t been fulfilled – but there is no reason to believe they won’t be in the future.

There are a couple of things that encourage me in this belief: firstly, the property market has stabilised, resulting in a correction of city centre property prices, which are now far more realistic and attractive.

Secondly, over the last four years Liverpool has been in the middle of the "Big Dig", and at times it has quite literally resembled a building site as all the utilities and infrastructure is prepared to cope with the big retail development that is Liverpool One.

Once that work is completed, and the physical regeneration of Liverpool has been delivered, the city is going to be far more attractive – to look at and to live in, which means there is massive scope to attract more people.

If you were looking to buy in Liverpool city centre, you would be waiting until all that is out of the way.

And the new retail development and attractive city apartments are not Liverpool’s only positives. We have witnessed a significant increase in quality bars and restaurants, to complement the fabulous museums and art galleries that we can boast, and the renaissance of what was until recently a tired waterfront, soon to be home to the new arena and conference centre.

Arguably, though, it is the development of new available commercial space that is going to provide the real boost that the city centre residential market requires.

As more professionals begin to work in the city, more will live here, and I think we are going to have a whole new market of people who will want to buy or rent city apartments.

One of the problems we have in this country is that politicians tend to dictate to the experts in a marketplace. The idea that people are going to invest millions of pounds to build apartments that are never going to be sold or lived in is ludicrous. These people know what they’re doing and, despite recent difficulties, the property market is still performing strongly.

I think less intervention from planners and from government could actually see a boost in the market. And decision-makers and influential figures talking the city centre up, rather than condemning investors who have an ambition for the city, would be a more productive use of their time.

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The market itself will find its level. The quality of housing in Liverpool is what is important, not the quantity and the sooner that planners can get their heads around that the better.

The fact that people are prepared to invest in the city, whether it be through properties or retail developments, demonstrates a confidence in Liverpool that we haven’t seen for a long time.

If developers build the properties, then they will be filled. It may take a couple of years to fill all of them, but I am confident it will happen.

Nobody has subsidised these developments, they are being built by private money, and the investors will want them to work.

The Post Forum

Stuart Kellner, managing director of Dufton Kellner chartered accountants, in Heswall:

“I think there probably are too many smaller units, but I don’t think it’s quite as bad as it has been made out, if people are willing to hold on for a while. In the longer term, I am sure the market will come back. I would think developers will be looking at more family-sized properties, and ultimately the market is a better decider than planning officers.”

Nick Hughes, MD of South Liverpool Recruitment Ltd:

“Nationally, I agree with predictions that property prices will drop over the next year or so. The local market will buck that trend and sales in Liverpool will continue to be strong. I think next year will be a good year for Liverpool. I would also expect new flats to do well against pre-owned apartments.”

Ray Leary, managing director of Business Marketing, in Warrington:

“I think the sale of that flat is a sign of the market correcting itself and could be a sign of things to come. There is overkill in terms of the numbers of apartments in Liverpool, and the mix is not necessarily correct. There are too many one-bedroom apartments, not enough two or three-bedroom ones for the older professionals.”

Kay Ruddy, managing director Of Bebington Glass, New Ferry, Wirral:

“Maybe it’s different in the city centre with property for single people and couples but I recently put my house, a traditional semi, up for sale and it went within 10 days, and my mum’s sold the day it went on the market.”