Not long ago people were queuing to buy city centre appartments, now you can pick up a ‘luxury’ flat for a fraction of the price
I’m not the first person to say so, but it is undeniably true that Brum’s city centre has been transformed over the past few years. Schemes such as Brindleyplace, the Mailbox and the Bullring have created fantastic public spaces in the heart of the city.
One obvious change has been the massive growth in the number of city centre flats. According to Knight Frank, during the five years to 2006/2007 just under 6,000 apartments were built with a further 12,000 currently in the pipeline.
Even before the credit crunch hit, this had created a problem: supply has massively exceeded demand. The initial construction seems to have been funded in part by buy-to-let investors, many of whom are now struggling to charge tenants sufficient in rent to meet their mortgage payments and service charge obligations. And that’s if they can find tenants at all – local agents estimate that there were more than 1,500 empty flats in the city as of the start of the summer.
In the five years to 2006/2007 just under 6,000 apartments were built with a further 12,000 currently in the pipeline
Owners of flats at the Rotunda are the latest to face difficulties. Back in 2005, people queued through the night and the entire development was sold in 20 minutes. Ninety-eight per cent of the purchasers did so on a buy-to-let basis. They are now facing the double whammy of a fall in the capital value of their flats (an average of £25,000 throughout the development) and an inability to find tenants, even at significantly-reduced rents.
And Brum is not alone in this regard. Type “empty flats” into Google and a national tale of woe – often related to the buy-to-let boom – emerges. Thisismoney.co.uk estimates that buy-to-let mortgages have increased from 29,000 10 years ago to over 1 million now. £122bn worth of property has been secured on that basis. Unfortunately for investors, mortgage costs have increased three times more quickly than rents (which have in part been driven down by the massive over-supply in city centre apartments).
The problem for cities like Brum is that things may well get worse before they get better. Regeneration is supposed to rejuvenate our city centres. There is a risk that it may well result in yet more half-empty blocks of flats. On the plus side, if city centre living is your goal, you will soon have about 13,500 apartments to choose from in the second city. You just may not have that many neighbours.