Leeds is digging in for the duration of the downturn. Some might say this is the only digging that is going on. The city has suffered two high-profile development disasters in the past few weeks. K.W.Linfoot's Lumiere - 952 apartments co-designed with Philippe Starck and hyped as the highest residential towers in Europe - has been put on hold, and Simons Developments' the Kissing Towers, comprising 301 apartments, an hotel and shops, has been cancelled. Builders have been laid off, sites locked, and investors' deposits in Lumiere frozen.

Across the city centre and the suburbs, there is little evidence of sales but plenty of demand for rentals, which are booming. Jonathan Morgan, of Morgan City Living estate agency in Leeds, says: “We are having to stay open until 8pm to cope with rentals. We have run out of flats. People can't afford to buy, can't get a mortgage, or are nervous in case they get lumbered with a flat they can't sell.”

However, Chris Town, a landlord in Leeds and a director of the Residential Landlords Association, says that many investors are suffering from low returns. “A few years ago, in Clarence Dock [a 1,114-apartment scheme about 20 minutes' walk from the railway station], a friend was renting out a two-bedroom flat with parking at £1,200 a month, a return of 5per cent,” he says. “Now he is struggling to get £800. The city centre has always done well - it's the peripheral areas that are suffering.”

Holbeck Urban Village, a former industrial area to the south of the city centre, adjoining the River Aire and canal, has been called “peripheral”. There are three residential/mixed-use schemes. Round Foundry, an 18th-century engineering foundry, was converted into offices and apartments in 2004. Manor Mills, another partnership between K.W.Linfoot and Starck, comprises 280 apartments, and is due to complete in September. The scheme began marketing in June 2006 when the outlook was more optimistic, so it is telling that all have sold.The 282 apartments at Granary Wharf, by the waterside developer ISIS, cost between £116,000 for a 340sqft studio to more than £351,000 for a 1,230sqft three-bedroom duplex with garden terrace.

Janette Workman, a civil servant, and her husband, Colin, an accountant, bought a 1,218sqft duplex for £343,000 off-plan at Granary Wharf in July 2007. It will be ready in 2009. The couple, pictured below, live in Harrogate but are moving to Leeds for work and the nightlife. They are indicative of a new breed of mature owner-occupiers coming into the Leeds market. “We are very, very cautious about buying off-plan,” she says. “But we have chosen carefully. We didn't want to be in a huge block with lots of buy-to-let. We are on the fifth floor with a view of the canal, not in some glass tower high up with nothing but the sky.”

Richard Lewis, director of the property developer Town Centre Securities, injects a note of pessimism. Ask him what is happening in Leeds right now and he says, “Sod all”. He is blunt, but disingenuous. His company and four other developers, MEPC, HBGProperties, K.W.Linfoot and Bruntwood, have formed the West End Partnership. It is investing £1 billion in creating a five-star financial district in Leeds around Wellington Street, near the railway station and a road link to the motorway network. The 22-acre scheme will eventually consist of 3,440 flats including Lumiere, plus at least three million sq ft of offices and 185,879 sq ft of retail space. Tenants so far include the business consultancy PricewaterhouseCoopers and the insurance company Allianz Cornhill.

Lewis may say that there is little building activity in Leeds, but it is significant that a £1million bridge that spans the River Aire to create a link to Holbeck has been completed. “One of the reasons we have come together is to create the space in-between,” Lewis says. “We want there to be connections and walkways and green areas which link together the various aspects of the site and connect it to the rest of Leeds.”

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