City living reached for the sky and fell to earth, but is it now bouncing back?

A flat building frenzy created almost 10,000 new homes in Leeds city centre plus a plethora of property millionaires.

As plans were approved to cap it all with Lumiere, a shimmering glass skyscraper set to be the tallest residential tower in Europe, the

market collapsed.

At the end of 2007, the decade- long party came to an end, the banks stopped lending and the buy-to-let boom went bust.

Leeds city centre was left with one mighty hangover as developers, including city living pioneer and Lumiere partner KW Linfoot, went out of business and scores of schemes were mothballed.

Yet despite the pain, a new report reveals that the credit crunch and ensuing recession have done city living a big favour.

City Living beyond the Boom by respected academic Dr Rachael Unsworth shows that the number of flats is sustainable and demand for them is high.

While there is no figure for overall occupancy available, a poll of six major lettings agents reveals that 92 per cent are let with rents back up to 2007 levels (costing from 550 a month for a one bedroom and from 750 for a two bed).

Buyers are still thin on the ground but after dropping around 20 per cent of their value and a rash of repossessions in 2008, mostly from West Point, Concord Street and City Island, average prices are also up to 2007 levels and are on course for future growth

Figures compiled by Dr Unsworth of the Leeds University School of Geography finally quash fears of oversupply that have plagued the market.

They show that post-recession Leeds city centre is leaner and fitter after the brakes were put on building and only another 600-700 flats have any chance of being built in the next five years.

More than 30 schemes with planning permission for around 10,000 flats have stalled and are unlikely to go ahead before 2015. Many will be reworked and some won't come out of the ground at all.

Another 5,760 proposed flats presently without planning permission are even more unlikely to be built.

It is good news for a market that was battered by a barrage of bad publicity after a national newspaper wrongly claimed that 70 per cent of the flats in Leeds were empty and one commentator said they would be the "slums of the future".

That falsehood has caused lasting damage, but it's easy to see why there were fears of apartment overload three years ago. It felt like flats were being thrown up everywhere and most of the apartments were sold off-plan to investors so when schemes were completed, the owners tried to sell or let them in their hundreds, and there were temporary gluts.

Some flats were also badly- located, poorly-designed and struggled to compete against more central locations.

"There was a three-year media frenzy cataloguing the failures of city living in Leeds and it was all based on something that was nonsense. I have no idea where that 70 per cent figure came from," says Dr

Unsworth, whose independent report was commissioned by five agents all determined to fight back.

Morgans City Living, Knight Frank, Savills, King Sturge and Allsop knew what they were experiencing on the ground was very different to the national reports.

Jonathan Morgan, managing director of Morgans City Living, says: "Mud sticks. Developers trying to raise finance or get underwriters in London to back a scheme still struggle because the perception is that Leeds is oversupplied when, in fact, we aren't and we're much better placed than places like Manchester, Birmingham and LIverpool.

"This image of loads of empty flats still haunts us. It's been very damaging and it's not true."

There is one building that is unoccupied at City Island.

It belongs to the Bank of Kuwait who thought they'd ride the storm and sell when the market recovered. They are now planning to let the properties.

The bank, like others who built and bought at the wrong time, will become a reluctant landlord, but at least they will have some income.

Those who bought land at the height of the boom are effectively paralysed.

The banks aren't keen to fund construction, there are few off-plan investors and the land is worth a third of what they paid for it. No one is keen to sell on and realise that loss.

But the report says this gives time for reflection after a period when the city council was overwhelmed by planning applications resulting in a "less than coherent and admirable set of additions to the built environment".

Jonathan Morgan agrees that some of the flats dubbed "rabbit hutches in the sky" were built for investors rather than occupiers."The buy-to-let bubble that drove the first phase of development is finished and we

won't see it again.

"There will be a demand for better quality, smaller schemes with

larger, well-thought out apartments.

"I know of one developer who is thinking of building a mews and

hopefully this will help in retaining people longer than two or three years before they move out to the suburbs," he says.

"I also think we'll see investors buying ready-rented property, an existing apartment with a tenant."

Better design, together with long-term predictions that people will need to live closer to work due to high fuel and travel costs, means this could be a bright new dawn for city living.

"The city centre is a vibrant, popular place to live and we have shown beyond doubt that occupation is high and the pipeline is under control," says Jonathan Morgan.

"In fact, we're more likely to have an under supply of apartments in the future."

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In the city

n There are about 1.4 people per household in the city centre and there are around 13,000 living there.

n The occupation is thought to be 60 per cent tenants and 40 per cent owner occupiers.

n City dwellers include young professionals, health workers from the hospitals, a growing gay community, middle-aged people downsizing and high fliers who need a pied terre. There are students, but they are in a minority and tend to be from overseas. Different nationalities prefer certain developments and tend to group together.

n Flats cost around 125,000 for one bedroom and from about 175,000 with parking to 240,00 for a two-bedroom in the popular Brewery Wharf development. Most are back to 2007 levels, with some exceptions. A two bed-flat in the less favourably located Trinity One cost 185,000 in 2007 but recently sold for 150,000. An apartment at 1 Dock Street was 297,500 and recently sold for 325,000.

n Facilities have improved and there are now convenience stores and a drop-in health centre. More are in store, as well as tree planting, pocket parks and an arena.