Liverpool is undergoing enormous regeneration in its run-up to European City of Culture status in 2008. Alan Bevan looks beyond the hype.

Despite what you may have read in the national press, the market in central Liverpool is subdued, and although activity levels picked up slightly over the summer, achieving sales remains difficult. Prices have edged down since the peak in May/June 2004 by around 5 to 10%.

There is no doubt that a buyer’s market is prevailing with an everincreasing choice of property.

There are some seasoned investors who are buying, with especially strong interest from the Irish investment community.

The spike in prices and demand that occurred in the city centre in late 2003 and early 2004 was driven by speculators keen to jump on the bandwagon in pursuit of ‘easy money’.

At that time, buyers were paying a premium of 10 to 15% for an off-plan apartment in anticipation of continued rising prices.

With many of these apartments now completing and the froth having come out of the market, many of these speculators are having to sell at, or around, what they paid.

We are yet to see buyers walk away from their 10% deposits, but this may happen over the coming months in some schemes.

The off-plan market at the moment is difficult. As with any market, those schemes that are realistically priced and offer something slightly better than the norm are selling reasonably well.

Unfortunately, there are some developments where the prices asked are well in excess of their true worth. Some discounts and deals are inevitable. But while many multiple units buyers and investors are achieving 15% discounts in other cities, there has been very little evidence of this in Liverpool where discounts of around 10% are the normal maximum.

Perhaps the surprise of the current market is how well-established property in Liverpool is doing.

The market over £250,000 is stronger than ever. Indeed, my own firm City Residential have just had their busiest month for sales this year and their best ever month for completions.

The market that is struggling is focused on those properties that have been bought by speculators looking to sell on. Whether it is down to a reluctance to set realistic asking prices or a lack of interest on behalf of buyers to purchase recently completed apartments, the market is extremely difficult.

Various new developments have launched this year and overall have been reasonably successful:

Eden Square, Hatton Garden - Downing Developments. This large mixed-use scheme located off Dale Street has had a good few months since the launch in late spring, with a total of 37 apartments having been sold in the first five months at around £265/sq ft net. Phase 2 has just launched.

Alexandra Tower, Princes Dock - Millennium Estates. Launched in February, 50% of the available units were sold within two weeks of being released at prices averaging £325/sq ft. Some 75% of the scheme is now sold, although sales on the remaining units have been tough.

Elysian Fields, Colquitt Street - Illiad. Illiad’s latest scheme in the city launched in March to existing clients who have reserved approximately 75% of the scheme at prices believed to average around £275/sq ft. Sales on the remaining 25% of units have been more difficult.

No 2 Temple Square, Temple Street - Villagate. With prices from £101,950, this scheme was always likely to prove popular and 50% of the units were sold at the launch. It differs from most schemes in that the development was complete when launched. Prices averaged £230/sq ft. At September, 85% of the scheme had been sold.

St Paul’s Square, Old Hall Street - English Cities Fund. Located in the heart of the new business district, this £80 million scheme was launched in the summer and has had a reasonable response, with about 20% of the scheme sold at around £250/sq ft. The next phase is due early next year.

L1, Baltic Triangle - Windsor Estates. This ground-breaking scheme from London-based Windsor Estates was 'quietly' launched in early July. Early interest in the scheme has been poor, although this may well be down to a high average size (950sq ft) and cost per sq ft (£325).

Westminster Chambers, Crosshall Street - Space. Although only just launched in October, early interest in this stylish conversion in the heart of the city has been strong, with nearly 20% of the development sold.

West Tower, The Strand - Beetham. Approximately 60% of the scheme has been reserved by existing Beetham investors. Subsequent property shows and sales drives have been less successful; prices believed to be around the £300/sq ft mark.

Walker House, Exchange Flags - Walton Group.This scheme has been launched to the investment community at prices averaging at the £250/260 per sq ft mark. Although planning was obtained for all of the building, it is now just Walker House that is likely to be developed into residential units.

Other developments including The Albany, Unity, and No 1 Princes Dock are all struggling to sell, mainly due to the pricing rather than the quality or location of the schemes. Further developments are coming soon:

• Pall Mall, Pall Mall - Persimmon Homes
• Great Crosshall Street - PR Homes
• Kings Dock - David McLean Homes.

The rental market has suffered over the past two years in central Liverpool as rising prices and an increase in supply has driven rental yields down from 8% to around 4.5%.

However, many people are considering renting instead of buying. This has fuelled quite a strong demand for rental apartments, particularly in the £450/575 per month range. The only area of the market that continues to struggle is above £800 per month.

Despite government enthusiasm for us to use public transport, most tenants still look for parking and this will normally add around 10% to the rental.

Furnished properties are much more popular than unfurnished, especially at the lower end of the market.

Whilst we believe that we are in for maybe three or four years of much tougher conditions, we do believe that the city will outperform markets in many other parts of the country.

The residential market is also benefiting from a substantial improvement in the quality of development and specification. Purchasers are now demanding much more, and the likes of Alexandra Tower, Eden Square, Elysian Fields, Unity, L1 and No 1 Princes Dock look set to deliver just that.

As with any location there are likely to be some successes and failures when it comes to new developments. Already there are schemes coming to the market that do not look sustainable and whose pricing appears unachievable.

Full details of all the schemes listed above can be found on www.cityresidential.co.uk