A MAJOR development of flats has been shelved to make way for a budget hotel in the latest sign of crisis in the property market.

The Greenwich site was supposed to be turned into 14 apartments but will instead be developed as a 97-bed Travelodge hotel.

Analysts Capital Economics said the deal was typical of the London market, which has seen new housebuilding come to a halt. City & Suburban Homes bought the land in Greenwich High Road two years ago, but soon after planning permission was granted the market collapsed.

Travelodge swooped in to buy the site and will now invest £5.5million in a budget hotel.

Spokesman Paul Harvey said: "This is our first development on land previously designated for residential use. 

"Since the downturn began we have been offered over 100 former residential sites but the vast majority are simply not suitable for development as a hotel."

Travelodge will now have to submit a new planning application for the site.

Mr Harvey added: "As we continue to seek city centre sites, expect us to exchange on many more over the forthcoming months."

The company is also interested in converting redundant offices.

Travelodge opened six hotels in former office blocks last year, including its 190-bed hotel at Tower Bridge, making a total of 22, and three more are planned for this year. Developer Andreas Panayiotou, who sold 2,500 flats before the market collapsed, has also revealed he is planning to concentrate on hotels and has applied to build one in Syon Park, Isleworth.

The developer said enquiries had risen recently but would not be enough to turn the tide.

"Even if the rise in buyer enquiries is sustained over the next 12 months, the expectation of lower prices could accelerate rather than slow the rate of house price deflation."

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