The slump in value of newly built flats in city centres has meant that they have lost a deposit of more than 20 thousand GBP and they have no home to show for it. Both civil servant Adele, 28, and husband Travis, 30, a sales manager, wanted to live in Birmingham's rapidly regenerating centre.

In 2004, they signed up for a two-bedroom flat in what was then billed as one of the most prestigious of many new developments - the Orion Building, moments away from New Street Station and a new shopping complex. The property was to be completed in February this year and developer Crosby priced it at £230,000.

Crosby offered Adele and Travis a £7,000 discount, making the purchase-price £223,000. They paid a 10% deposit and agreed to buy the flat on completion.

Their good incomes meant that they could easily borrow the £200,000 needed to complete the deal, and they had agreed a mortgage in principle with Cheltenham & Gloucester. But what they had not reckoned on was a crash in the flat's value.

In February, when the flat was finished, C&G valued it at only £185,000. Horrified, the couple contacted Crosby, which recommended they find another lender. They did - Coventry Building Society. Unfortunately, Coventry employed the same valuer as C&G, with the same result.

Desperate to get assurance that the flat was worth what they had promised to pay, Adele rang round the city's estate agencies. All said that the property, on the fifth floor and facing a courtyard, would be worth no more than £200,000, and probably less.

Unable to complete the deal, the couple are now resigned to losing their deposit. They could face further costs as they are in breach of their contract with Crosby. The Cowgills' nightmare is reflected in falling or stagnant values of similar properties in city centres around the country. City centres have seen huge developments, many containing several hundred near-identical apartments, in areas where there are scant facilities and where there is no recent history of residential use.

In 1998, two-bedroom flats made up just 7% of newly built properties. In 2004-2005, that figure had risen to 30%. While the Government promotes this high-density form of housing and developers favour it, is there really sufficient demand? Some lenders, such as Portman Building Society , refuse to lend investors money to buy these properties because, it claims, values are so unreliable.

Portman director Matthew Wyles says there is also no reliable indication of demand. 'Many of these developments are still being planned, or built based on demand seen several years ago,' he says. 'Those prices are no longer achievable.'

London, which has seen the greatest number of developments, is thought to be more immune to price corrections because there is a history of city centre living and potentially enough demand to mop up supply.

But questions have been raised about the true demand for the vast and growing developments in Newcastle, Manchester, Leeds and Birmingham - and even more so in centres such as Nottingham, Leicester and Portsmouth.

Crosby told Financial Mail that discussions with the Cowgills were continuing. The company said its own surveyor 'valued the property up to the value it was marketed at'. It added: 'Each year, hundreds of our properties are valued at both the time of reservation and completion and it is inevitable some results will vary.'

Worryingly, in the light of the Cowgills' experience, Crosby says a new phase of 180 flats is about to be launched in the Orion complex, where there are already 346 apartments.

Developers rely on incentives such as cashbacks or discounts to shift the near-identical flats they have built in their thousands in city centres. They say that prices of such properties are holding well and demand is big. Others are not convinced.

Liam Bailey, head of research at estate agent Knight Frank, says: 'There is no major city centre where prices for this type of property are not flat or falling.' Matthew Wyles, Portman Building Society director, says: 'Developers are giving investment buyers discounts to keep prices high. The victims are lenders, who lend more money than they would wish, and owner-occupiers who end up overpaying.'

Milan Khatri, economist at the Royal Institution of Chartered Surveyors, says: 'It is difficult for surveyors to value these properties. Anecdotal evidence suggests developers use incentives to mask falling prices.'

Ian Ward, boss of Leeds Building Society and head of the city's Chamber of Commerce Property Forum, says: 'There is long-term demand for city living, but planners are not building enough parks, schools and other facilities to support it.'

Copyright © 2005 First Mortgage Trust