It seemed so easy: you slapped down the deposit for a flat in the new tower block rising from a vacant plot in the centre of a thriving northern city, sat back and watched your money grow. Rental income would more than cover the cost of your low-interest mortgage. The capital value of the property would soar. It sounded almost too good to be true. And it was.

The bursting of the bubble fuelled by the middle-class stampede into buy-to-let investment has caused a surge in repossessions of city-centre apartments across the country. Nowhere is the impact more visible than in Leeds, whose landscape has been transformed since it belatedly embraced the concept of city-centre living at the turn of the century.

Giant cranes on the latest urban-chic developments still dominate the skyline, but squint at them through this week’s dazzling sunlight and it was tempting to cast a passing flock of birds as an army of bloated chickens coming home to roost.

In 1996 Leeds had a mere handful of city centre apartments. In the six years to 2002, a further 1,035 flats were built and the five years from 2002 to 2007 brought an additional 5,900. The city centre now has 7,070 flats, with a further 2,096 under construction, 8,514 with planning consent and 1,362 awaiting planning permission. If all the proposed developments go ahead, Leeds will have more than 19,000, mainly one or two-bedroom flats in which to house the young workforce of its burgeoning concrete metropolis.

And yet it is estimated that more than 1,000 of the city centre’s existing flats are lying vacant. Property prices in some apartment blocks have plunged, rental fees are static and mortgage costs have leapt.

High-quality developments in the best locations continue to flourish, but cautionary tales from elsewhere suggest, in the words of one estate agent, that some so-called luxury apartments “are in danger of becoming inner-city slums of the future”.

The consensus among the city’s property professionals is that Leeds is learning a harsh lesson. Flats should be built for the people who are going to live in them, not for investors seeking to make a quick buck.

An estimated 80 per cent of the city centre flats in Leeds were bought as buy-to-let investments, many by members of investment clubs. More than 1,000 were purchased by members of one such club, Instant Access Properties, whose sister company, Inside Track Seminars, went into administration recently. Many buy-to-let investors bought flats off plan without even visiting Leeds.

Members of one property club bought a significant chunk of the 235 flats built by Bryant Homes in a huge complex that opened in 2003 under the name of Aspect 14. Of the 11 flats in the block that have been sold most recently, the average price fetched was £129,000. A few years earlier their average purchase price was £166,000. Aspect 14 is on the northeast fringe of the city centre, next to a busy dual carriageway and on the edge of Little London, one of the most deprived housing estates in Leeds.

At another isolated but even newer development of 400 flats, City Island, completed in 2005, properties are selling for £50,000 less than their purchase price. It has already gained the unhappy nickname of “S****y Island”.

George Wimpey set further alarm bells ringing when it announced in November that it was mothballing its plans to build 800 city-centre apartments as part of a £100 million, mixed-use development called Green Bank. It blamed its decision on “the current uncertain market conditions for high-rise apartments in central Leeds”.

A recent riverside development of 50 flats — each with an agreed buyer who had paid a 10 per cent deposit of £20,000 — is empty because every purchaser has pulled out. The £20,000 they have all lost is far less than the fall in the value of each flat since they signed their off-plan deals. Mark Ryder, chief executive of Isis Waterside Regeneration, whose Granary Wharf development of 282 flats, plus an hotel and a Jamie Oliver restaurant is due to be completed next year, has little sympathy for those nursing burnt fingers. Isis has set out to “design for real people” and refused to sell to bulk-purchase speculators, he said.

“Leeds is a fantastic city. It’s got great character, great potential and the economy is very strong. There is still a demand for city living.”

Andrew Carter, the leader of Leeds City Council, said: “The way forward is undoubtedly for top-class design in the best possible locations. The days of Identikits are over.” He senses a potential bonus if the city centre can replace “some of this speculative, buy-to-let investment” with more owner-occupiers keen to put down roots.

So it may be that the long-term consequence of the financial woes hitting armchair property speculators in the Home Counties is an increasing focus on building higher-quality homes for Leeds’ city centre residents.

Yorkshire to gain from southern greed? What an irony that would be.