The excess supply of city centre apartments has now been corrected due to substantial growth in tenant demand and a lack of new supply, according to the property consultancy Assetz. But the ongoing belief that the oversupply situation still persists is hampering the financing of much needed new residential development and now compounding a serious shortage of apartments with demand rising.

The northern residential market underwent an enormous expansion of apartment building between 2000 and 2008, when the UK housing market was booming and finance was readily available. This then resulted in an oversupply situation in cities such as Manchester, Leeds, Sheffield and Birmingham, despite the fact that demand for rental property in these newly regenerated cities was rising.

However, demand is now outstripping supply and forcing rents upwards as the lack of new development pushes city centres to have a shortage of apartment rental supply. Assetz say that the rental market is now exceptionally strong in the major cities, as restricted mortgage lending has left a whole generation of potential first time buyers with little prospect of buying a home. And it is this group which is most attracted to the concept of city centre apartment living, but tenants are finding themselves with very little choice of rental units being available.

Stuart Law, Chief Executive of Assetz, said: “As the myth of oversupplied city centres perpetuates, the shortage of apartments in cities such as Manchester and Leeds is resulting in significant competition between tenants and this is driving up rental values. Banks refuse to fund much needed development which is worsening the undersupply situation, and with no measurable new build properties completing in the foreseeable future, tenants are going to find themselves increasingly squeezed out of core areas.”