It's a turkey. Christmas time for the shorts

REALITY MAY SOON catch up with the Mad Bulls

The souring of the inner-city dream has left a glut of empty, new-build apartments, affordable to few and situated in communities bereft of families. What now for the super-cool, urban living space that stands empty? Caroline McGhie reports on a post-Sipps nightmare

As early as spring last year, residential analysts at the Savills estate agency were predicting that too many new flats could swamp the market. The figures tell the story. In 1999, about 17 per cent of homes being built were flats. By last year, this had soared to around 42 per cent and this year it went up again to 45 per cent.

"Planners should be getting worried about the numbers being built," says a Savills spokesman. "We doubt that the national need for housing is best served by the development of one- and two-bedroom flats."

In the drive to build at a higher density on brownfield sites, it suggests, the Government has neglected to think about what buyers actually want. It gets more damning.

"The policy has not even led to more homes being built. The development of flats ties up so much cash that housing output has not risen. Rather, we are simply changing the balance of what is being built."

While young city movers may relish the loft-and-latte lifestyle, the market for what Savills calls "new product" could be thin beyond city centres. "For large swathes of suburban, semi-rural and rural areas, the high-density approach needs to be treated carefully, as the demand for the end product can be very limited," adds the spokesman.

Now that buy-to-let has slowed, interest rates are higher and transactions are at their lowest figure since 1974, developers are left with huge projects on their hands. Following Gordon Brown's cancellation of Sipps benefits on residential property last week, the expected flow of eager investors has effectively been plugged.

"There isn't much developers can do," says Richard Donnell, research director at Hometrack. "They can spend more on marketing, offer incentives, cut prices, grin and bear it. The other thing we will see is that they will go back to change the planning permission to 100 per cent affordable housing, and then sell on to a housing association."

Building flats in city centres has regenerated many no-go areas and the number of residents in central Leeds, Sheffield, Manchester, Liverpool and Newcastle has grown 140 per cent in the past decade.

However, this has been at a social cost: there are few families or elderly people, and some areas are regarded as unsustainable as a result, says Knight Frank's recent Future City report.


A Dockland's penthouse - but the buy-to-let market may be slowing down
Liam Bailey, head of residential research at Knight Frank, says that many developers with flats coming on to the market now bought the sites several years ago, when the market was still buoyant.

As prices have stagnated, he predicts that they will have had difficulty recouping their costs, particularly with "standard" flats, "because they don't have anything unusual about them that could help them sell on in the future".

London

More than 90 per cent of planning permissions in the pipeline are for flats, with Southwark, Hackney and especially Tower Hamlets due to swallow at least 52 per cent of them by 2016.

"Concern grows that new-build family housing is becoming a rarity in city centres," says Knight Frank, in its latest report, The New London. As investors shrivel, some developers are offering 10 to 20 per cent discounts on group purchases.

"The market for two-bedroom flats in secondary locations has been the hardest-hit, with some areas being flooded by a mass of identical products."

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