City living is a success but stigma affects lending

The last property boom gave Leeds city centre all the hallmarks of success. Skyscrapers, penthouses, top restaurants and the first branch of Harvey Nichols outside London, which earned it the title “Knightsbridge of the North.”

Developers went into overdrive, building hundreds of apartments to fulfil a demand for city living until a double blow. London architect Maxwell Hutchinson branded Leeds “the empty flats capital of the north” and predicted that its apartments would be the “slums of the future”. Then the banking crisis hit and no-one could get a mortgage or funding for construction.

Now the recession is over and the flats are full with a clear need for more. Yet, despite the undisputed success of city living, borrowing is proving to be an issue thanks to the stigma created by Hutchinson’s headline-grabbing remarks.

Naveen Ahmed, MD of Parklane Properties, is expanding the firm’s luxury accommodation brand, Iconinc, aimed at students and young professionals. He says that while banks are more than happy to lend on schemes in nearby Manchester, they are less enthusiastic when it comes to supporting them in Leeds.

“In the end, we ended up funding our development in Leeds ourselves,” he says. “There seems to be a problem as far as some banks are concerned and that’s unfair because this is an incredibly successful city.”

Jonathan Morgan, MD of Morgans sales and lettings, agrees: “Hutchinson’s comments have stuck and we feel the effects every day. If we get an enquiry from the south of England then the expectation is that it’s easy to buy or rent a flat in Leeds because we’ve got so many empty. Nothing could be further from the truth.”

The issue has reignited the debate over whether Leeds or Manchester is capital of the north, a sought-after title thanks to the government’s bid to create a “Northern Powerhouse.”

Manchester boasts two Premier League football teams, an international airport, trams and Media City. It also has swagger and an adventurous, politically stable city council.

“Their airport is certainly better than ours and the council is more risk-friendly and happy to enter into joint ventures with developers. However, we are a dynamic city, our arena is better than Manchester’s and our city centre is far more attractive. I also think Leeds offers a much better quality of life. Don’t get me wrong I like going to Manchester but I like coming away again. It’s not somewhere I’d like to live,” says Jonathan.

The rental market in Leeds city centre is booming and the sales market is also buoyant with interest from investors and owner occupiers. Prices are similar to those in Manchester. They start at around £90,000 for a one-bedroom flat and have climbed back to pre-2008 levels.

Satty Bhamra, sales manager at Parklane Properties, expects them to rise significantly over the next 12 to 18 months: “At the moment surveyors are down valuing and being cautious and this is keeping an increase in prices at bay but as more properties sell, values will increase. I predict there could be a rise of 20 to 25 per cent over the next 12 to 18 months.”

The lending drought in LS1 may be hampering progress but it has not stopped building. There are some exciting schemes in the offing from well-funded developers, including plans by Igloo to create the Ironworks, 60 flats and 15 townhouses in Holbeck Urban Village. Hammerson is building the Victoria Gate shopping centre, which will house the biggest John Lewis store outside London when it opens in autumn next year.

“We are on the cusp of another raft of development and I think we will also see a return to buying off-plan,” says Jonathan. “The good news is that we are seeing some real thought going into design. The apartments of tomorrow will be much better than some of those built in the boom. That will be something to shout about,” says Jonathan, who believes that promoting the city is crucial if it is to combat the “Maxwell Hutchinson effect.”

“Manchester is very good at promoting itself and that’s something we need to do more of.”

**Sound of the Suburbs: House prices in desirable suburbs such as Roundhay and Horsforth are comparable with those in Manchester. Mark Manning, of estate and lettings agents Manning Stainton, says: “The big difference is that Manchester is sprawling. You have to go a long way before you hit countryside. That’s not the case in Leeds, which is more compact.” Like Leeds city centre, the suburbs are suffering a shortage of stock.“There is a supply and demand issue and this is exacerbated by the fact that there has been very little building over the last few years,” says Mark, who adds that Beeston, where prices start at about £70,000 for a two bedroom house, is being targeted by first-time buyers, while Kirkstall is an up-and-coming hotspot.