The excess supply of city centre apartments in some parts of the UK has now been corrected due to substantial growth in tenant demand and a lack of new supply, it is claimed.
But the belief that the situation still persists is hampering the financing of much needed new development and compounding a serious shortage of apartments, reports property investment specialist Assetz.
The northern residential market underwent an enormous expansion of apartment building between 2000 and 2008, when the housing market was booming and finance was readily available. This resulted in an oversupply situation in cities such as Manchester, Leeds, Sheffield and Birmingham, despite the fact that demand for rental property in these regenerated cities was itself rising strongly.
However, demand is now far outstripping supply and forcing rents dramatically upwards as the lack of new development pushes city centres into a shortage of flats, Assetz has found.
It says that the rental market is exceptionally strong in the major cities, as restricted mortgage lending has left a whole generation of potential first time buyers with little prospect of buying a home.
This group is attracted to the concept of city centre apartment living, but tenants are finding themselves with very little choice available.
‘As the myth of oversupplied city centres perpetuates, the shortage of apartments in cities such as Manchester and Leeds is resulting in significant competition between tenants and driving up rental values,’ said Stuart Law, chief executive of Assetz.
‘Banks refuse to fund much needed development which is worsening the undersupply situation, and with no measurable new build properties completing in the foreseeable future, tenants are going to find themselves increasingly squeezed out of core areas,’ he added.
According to Matthew Smith from Manchester estate agents Thornley Groves, there is an overwhelming demand for rental properties in Manchester city centre, which has driven rents up by as much as 20% over the last year.
‘The long established notion that there is a surplus of empty properties is completely unfounded, with a typical ratio of five tenants to every one property,’ he explained.
‘During the current busy autumn period this ratio has been in the region of 20 tenants to every property. This has resulted in competition becoming extremely fierce with tenants often reserving properties without viewing to avoid missing out,’ he added.