Birmingham: staying afloat

The effect of the recession on the property market has been widely publicised. Laura Lupton investigates how this has hit Birmingham's canalside developments 

Enormous funds and resources have been invested in Birmingham's canals over the last two decades. Modern waterside developments are central to this transformation, but they are not immune to the recession.  

Investment in the waterways carried the city through the last recession, and canals have added around £42.8m to the value of investments in the city. 

Jim Quinn, project coordinator for Birmingham City Council, says: "During the late 1980s  and early 1990s, developers stopped other projects so they could continue those in Birmingham. They saw the advantages of the waterfront projects." 

These properties are highly desired by people wishing to live in the city centre.

Karina Hill, director of Birmingham-based sales and lettings agency Centrick Property, says: "There are a lot of people coming to work in the city who want to live centrally. Canalside properties, especially with balconies, are among the most sought-after because of the impression of space." 

But owners of buy-to-let properties in Birmingham are among the worst-hit by falling house prices, according to a survey by property market website mouseprice.com.

Hill says: "This is because a lot of irresponsible buy-to-let investors couldn't finance their properties, and have had them repossessed. These make the property in the city very difficult to sell at a good value." 

But waterside construction is continuing. The Cube, a canalside landmark designed by Gherkin architect Ken Shuttleworth, is due to open at the Gas Street Basin in  2010. The development will offer apartments, designer shops and a boutique hotel.

Alan Chatham, director of the Birmingham Development Company (BDC), which owns and is developing The Cube, says: "The high design and specification of The Cube means we are confident that interest will remain."

But Kevin Harris, director of letting agency Places Birmingham, offers a word of caution. "Many major developers are failing to sell large sections of new properties. Some haven't even gone to market. Instead they rent the properties or sell them off to investors in blocks and at heavy discounts. Hopefully they will reach the rental market soon," he says.  

Lettings in the city remain high as people cannot get mortgages and do not want to buy, fearing property prices will fall.

Hill says: "If developers rented the empty properties instead of holding out to sell them, they would probably have a high demand. This would stop developments from lying empty.

"Selling waterside properties has gone in flows over the last year. In the long-term this isn't a problem as canalside property in the city centre will always be sought-after."

Birmingham's regeneration strategy will undeniably provide a long-term gain. The redeveloped areas are still vital to the economy, even if new property developments are suffering.

The desire to create high-quality leisure and tourism venues in the city was one of the key drivers behind the regeneration of Birmingham's canals. The Waters Edge and Gas Street Basin, with their hotels, bars and restaurants, are now central to the city's catering and hospitality industry.   

This transition has taken time. Declining commercial use of the waterways during the 1980s left them unattractive and run-down, but the canalside's proximity to the city's shops meant its commercial potential was clear.

Around £559m was invested in the area between 1985 and 2001, and £488m has been invested since. Much of the initial investment was from the public sector, with grants from the city council and the European Regional Development Fund. But since 2001, much of the funding has been private. 

Birmingham is an example of how thoughtful planning around ailing canals can enhance towns and cities. With developers planning to continue this during the recession, Birmingham shows that waterside regeneration can have positive, lasting effects.