Many a cliché has been written about Salford. It has suffered in comparison with Manchester, only a few minutes' walk to the east, and has long fought a reputation for criminal activity. It is the fate of such towns that will be determined in a government report on the impact of the credit crunch on northern regeneration, due to be published at the end of this month.

“Salford and Manchester are like Buda and Pest,” maintains Chris Farrow, chief executive of the urban regeneration company Central Salford. “They are twin cities, separated by the River Irwell.” The common image is of a shiny glass and steel waterfront emerging out of derelict terraces, but Salford's 37 square miles comprise five distinct districts: Salford itself, including Salford Quays, plus Eccles (period family houses and high-rises), Worsley (always affluent), Irlam and Cadishead (industrial, but close to agricultural Cheshire) and Swinton and Pendlebury (much rejuvenated since the closure of Agecroft Colliery). The population is 272,000, an increase of 5per cent in five years.

Across Salford, prices rose by a few thousand pounds during the past year, although the number of transactions nose-dived. Between August 2007 and August this year the average achieved price for a detached house increased to £250,756, semi-

detached £137,832, terraced £76,678 and for flats £120,670. However, John Broadbent, head of new residential developments at Knight Frank in Manchester, says that some flats in Salford Quays are for sale with reductions of 30-40 per cent. City Lofts, which had a 203-unit twin-tower scheme there, is in administration. He estimates that almost a third of the City Loft flats remain unsold.

Salford has certainly been on a rollercoaster. The dominant housing stock of 19th-century terraces inspired Coronation Street, as well as Shelagh Delaney's play A Taste of Honey and Ewan MacColl's song Dirty Old Town. Many fell into disrepair as industry declined. Families dispersed into far-flung estates or were decanted into unsatisfactory “modern” schemes. Salford became ripe for regeneration. New houses and flats appeared in the late 1980s. In the mid-1990s The Lowry centre and the Imperial War Museum North opened at Salford Quays. Hundreds of flats followed.

Some of the earliest schemes, such as Merchants Quay, attracted Manchester glitterati such as the former Coronation Street actor Johnny Briggs. Meanwhile, developers such as Countryside Properties and Miller Homes looked at rundown areas such as Lower Broughton and Kersal and, backed by public money, embarked upon rebuilding shattered communities.

Lord Mandelson, the new Business Secretary, in Manchester this week at the Northern Regeneration Summit, would do well to visit Salford. It could teach him a salutary lesson about the property market in post-industrial northern cities. He should talk to people such as Farrow. “I knew there would be a recession the moment I saw that design for the Will Alsop tower block,” Farrow says. “It was just symptomatic of the way that developers thought they had to go for stuff like that.” It was only in June last year that Alsop, in collaboration with the local architects SMC DTR:UK and the property developer Vermont, gained planning permission for a futuristic 27-storey, mixed-use tower in the Chapel Street regeneration area.

It has not been built. “The development costs just go through the roof ,” Farrow adds. “When we talk about sustainable now we have to talk about financially sustainable.” Property minds are occupied with more pressing concerns - for example, what to do with the unsold flats in Salford Quays and how to fill the family properties being built in places such as Kersal, where there are five-bedroom detached houses with garages for £259,950.

Lack of mortgage finance is the problem. Broadbent says that the good news for investors is that the rental market is strong, with decent two-bed flats fetching £1,000 a month. Knight Frank's new northern England residential development review reports that investment fund interest has increased in recent months. “Most are targeting schemes with a 25 per cent to 35 per cent discount to valuation range and looking to achieve a 7 per cent to 7.5per cent gross yield. But the difficulty investors have ... is in judging the bottom of the market.”

Broadbent believes that the arrival of the BBC in 2011, when five London departments and its entire Manchester operation relocates to the new MediaCityUK, will mean even higher demand. “I can foresee a shortage of stock,” he says, “especially as so many new schemes have been put on hold.”

At Countryside Properties, the regional sales director Martin Leggett says that there is no shortage of people interested in buying at New Broughton, where prices for a one-bed flat start at £99,950 - or £49,975 through the FTBI-MyChoiceHomeBuy scheme - and £194,950 for a four-bed house. But they cannot get the money. “What is actually hindering them is the reluctance of banks to provide credit,” he says. If Lord Mandelson is looking for a way forward for places such as Salford he should turn his attention to projects such as this. Accordia, an innovative Countryside Properties mixed-tenure development of flats, duplexes and houses in Cambridge, won the RIBA Stirling Prize for architecture and was described by the judges as “high-density housing at its very best”.

Farrow believes that it was intended as “a big message to volume housebuilders. We can all gainfully use this recessionary period to realise much better-suited residential ambitions. We're not in some field in Cambridge here, but we have got to make the streets and neighbourhoods of Salford just as good.”

Case study

The Max McCarthys have high expectations for the planned Salford regeneration scheme. William Max McCarthy has just paid the deposits on two properties in a new development in New Broughton, on the eastern side of Salford and less than a mile from Manchester city centre. The deposits secured a four-bedroom house for his son, William, and a two-bedroom apartment for his daughter, Sonia, both pictured with him, a few doors down. Sonia, a chemistry teacher, said: “I didn't want to live right in the centre of Manchester, but I wanted to be close enough for the bars and restaurants.”

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