While transaction levels have reduced over the past year, it’s the non-residential market that has better weathered the storm caused by higher borrowing costs and economic uncertainty, with non-residential transaction levels down by just 5% year on year versus a 18% drop across the residential sector.
This is according to the latest analysis from APRAO, who analysed Government data on quarterly property market transactions, looking at the split between the residential and non-residential sectors.
The analysis showed that during the first quarter of 2024 some 255,570 transactions took place across the market as a whole, a quarterly drop of 13.1% and 7.4% fewer compared to Q1 last year.
In fact, it was the lowest quarterly total seen of any quarter since Q1 2022 following the first of 14 consecutive interest rate hikes in December 2021.
In terms of market split, residential transactions continued to account for the lion’s share of market activity, with 88.8% of transactions in Q1 of 2024 coming via the residential sector.
However, the 11.2% of market activity that did come via the non-residential sector was the highest proportion seen since the start of 2022.
When analysing transaction trends within each market segment, the research by APRAO also showed that the decline in market activity seen during the first quarter of this year has been far less pronounced within the non-residential sector.
Across the UK, residential transaction numbers fell by 17.8% in Q1 2024 versus Q1 2023. However, the decline seen across the non-resi sector sits at just 5%.
Residential sales were down by 18% or more across England (-18.7%) and Wales (-18%) during Q1 of this year, whilst across the non-residential sector they fell by just 4.7% and 3.7% respectively.
Just Scotland has seen a similar level of decline across both sectors, with residential transactions in Q1 down 9.5% year on year, while non-resi sales fell by 8.5% during the same period.
Daniel Norman, CEO of APRAO, said: “Since interest rates started to climb in December 2021, we saw fourteen consecutive hikes which cultivated a great deal of market uncertainty, not to mention the ever growing obstacle presented by increasing mortgage rates.
“This has presented a challenge for homebuyers and property investors alike and while we’ve now seen a freeze on rates, both residential and non-residential transactions hit a two year low during the first quarter of 2024.
“However, this reduction in market activity has been less pronounced across the non-residential sector, as while the initial investment requirement may be larger, the non-residential sector provides stronger returns and a greater degree of security in terms of longer contract lengths. Two key factors that will hold great appeal during times of market uncertainty and decline.”
