The problem coulbe simply be that there is no market for houses at the moment, so no one wants to get involved in it. The bank would be slow to give you a mortgage, i'd imagine, if you don't have development experience.
It does sound like a great price.
You would want to be sure there weren't title issues.
Also, it is worth checking if the property is a protected structure. If it is, then you won't be allowed demolish it (you need planning permission to demolish any habitable house in any case, I think).
The demolition could turn out to be quite 'technical'. The properties could be supporting other houses on the terrace.
There are people who spend all their days scouting around for deals like this and very little goes unnoticed in the city centre. I'm inclined to think there's a 'gotcha' somewhere, but there might not be.