The oversupply of city flats

As a countless number of new-build apartments stand empty across Britain’s urban skylines it is clear that the oversupply of new-build apartments in northern city centres has reached new levels. In areas like Leeds, Manchester, Birmingham and Cardiff Bay there are not only many unsold and empty flats but also thousands more apartment schemes in the planning process. These are now unlikely to be built, costing developers and landowners millions of pounds in land purchases and fees. “Too many flats have been speculatively built,” comments Paul McGowan, A Director of the Residential Development Team at Jones Lang LaSalle, “More recently areas such as Norwich, Ipswich, Bristol, Poole and Liverpool are experiencing a deep-seated problem with an oversupply of flats.”

This market saturation is a direct result of Government planning policy over the last 10 years that encouraged high density developments close to town and city centres and transport hubs. Lower density developments on green field sites were actively discouraged and therefore developers began to look to high-rise, city-centre schemes to achieve their volume targets. McGowan remarks, “This has inevitably led to the supply of city-centre flats far outstripping demand in certain areas around the country.” Nevertheless some areas will always thrive regardless and to date London has had sufficient demand for apartments for oversupply to be avoided. However McGowan warns that “Stratford will be an area to watch with 4000 flats reportedly coming to the market post the 2012 Olympics.”

It is believed by some that RSLs may offer a solution to this problem. However, there has been a mixed response to the Government’s announcement that £200million is available for RSLs to buy house builders’ unsold stock. Richard Ashdown, Director of Affordable Housing at Jones Lang LaSalle, comments “often the product does not meet RSLs’ standards in terms of unit size, environmental sustainability and location, there is an undersupply of houses in good quality locations.”

Furthermore, the impact of oversupply affects RSLs too, confirmed in a recent survey of RSLs by the Housing Corporation which showed flats becoming less attractive as market conditions continue to deteriorate. The shared ownership sales market has slumped in some marginal locations resulting in RSLs only making offers for this stock on the basis of social rented tenure. “This means RSLs can offer only a fraction of their market value, even if the stock on offer is suitable for their needs,” comments Ashdown.