Wednesday, March 14, 2007

Inner city pressure

Interesting story in the Yorkshire Post about concerns in Sheffield over the knock-on effects of the boom in city centre residential development. Big 'urban living' developments have mushroomed across the city centre, and continue to do so, with the number of city centre residents reportedly increasing by 250% in the past four years. Over half of the city centre flats are owned by private landlords.

There are now fears that the situation could have adverse effects on Sheffield's housing market, as speculators help to push up prices and the council's own waiting list for rented property continues to grow.
As a result, councillors have ordered a detailed report into the market changes, where most new apartments are beyond the reach of those with an income below £40,000.
Some councillors are concerned that the housing market has priced many young people out of ownership and created accommodation which may be under-occupied in many cases.
Despite those concerns, statistics produced by council officials suggest only seven per cent of rented apartments are empty at any one time.
The figure is a stark contrast with Leeds, which underwent a similar boom in city living, where the rate is about 40 per cent.

It's hard to see this situation as sustainable - and not just because of the effects on the city's broader housing market. With an over-supply of rented flats, rental yields have already fallen to marginal rates. Private owners (the vast majority of whom are presumably speculative investors) must then rely on continued rises in the capital price for their returns. With a 'correction' in the housing market long overdue, a lot of purchasers are going to find themselves at a loss - with a strong likelihood of a large portion of the stock going on the market at a depressed price. While that might be good news for the housing associations who need to expand their stock, it's probably not for the longer-term prospects for these huge housing schemes. The glamorous urban living apartments of today are likely to be the high-rise hellholes of tomorrow.

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Blogger Matt Povey said...

It wouldn't be the first time though would it. Leeds is interesting because it's the only Northern city (I could be wrong but I'm pretty sure this is the case) where this has already happened once before.

In the late 80s, there was a building boom down past the Calls with loads of waterfront flats being built. I remember people in Leeds referring to the Yuppie flats in town at the time.

When the Lawson economy went pop, the value of these places plummeted. This resulted in the early 90s in a lot of these places being bought up by precisely the sort of young people who are currently priced out of such properties. I was working cleaning the offices of the Leeds Development Agency on the Headrow at the time and remember that a colleague's son bought one up for a pittance.

It then only took another five or six years before the building boom took hold again. It'll be interesting to see if similar things happen again and what effect it will have on the Leeds economy.

Personally, I still regret not taking that Manchester city centre flat for £60,000 in 1997. Bugger.

5:38 pm, March 19, 2007  

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