As you rightly point out, the UK economic situation is somewhat less attractive now than in 2000. IMHO the biggest reason why I would not be buying a property like this now is that salaries have barely increased since 2000. House prices are way out of line with take home pay, In 2001 I bought a flat in London (recently sold I am pleased to add!) and at that point I thought that prices were unlikely to go up much, purely from an affordability point of view. I was of course assuming that most people would (like me) want a reasonable safety margin (i.e. 10-15% deposit, max 25yr mortgage at 3.5 times earnings, able to pay the mortgage and live on a single salary, etc). However, it seems most people are happy to throw caution to the wind and take out a huge loan, with almost no 'margin for error' in case on redundancy or a change in personal circumstances... it takes true bravery to trust our current crop of politicians with ensuring sub 4% interest rates over the next 20-25yrs!
Sorry to go so far off topic, getting back on topic... in late 1999 early 2000 I laughed out loud when I saw the price of a 2-bed flat the Quayside in Newcastle, which was around £130k at the time... overpriced then, Waaaaaaay overpriced now. I grew up in Newcastle and left when I was 21 to find work. There is still very little well paid work around there now, so why the ludicrous house prices? The answer: Sheep following the herd.