Property professionals and residential homeowners have all faced their fair share of well-publicised issues, challenges and obstacles in recent times. However, data indicates that property in the non-residential markets – such as commercial property – have shown better resilience.
It was interesting to see a report from property development appraisal software, APRAO, show that while transaction levels have reduced over the last year, the non-residential market appears to have better weathered the storm caused by higher borrowing costs and economic uncertainty.
This analysed Government data on quarterly property market transactions, looking at the split between the residential and non-residential sectors and how both have performed in what has been a challenging year for the UK market. It 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% when compared to Q1 last year.
In terms of market split, unsurprisingly, residential transactions continued to account for the lion’s share of market activity, with 88.8% of transactions in Q1 24 coming via the residential sector. However, the 11.2% of market activity that did come via the non-residential sector was suggested to be the highest proportion seen since the start of 2022.
In addition, the research found that the decline in market activity experienced 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-residential sector was reported to sit at just 5%.
This less pronounced market lull was suggested to be down to properties within the non-residential sector providing stronger returns and a greater degree of security in terms of longer contract lengths. Two key factors that hold great appeal during times of market uncertainty.
When talking about non-residential properties, attention inevitably gets pulled towards office space, shops, restaurants, industrial units and wide ranging activity around commercial property from a business owner, investor, landlord and developer perspective.
However, with residential, commercial and recreational spaces becoming a little more entwined following a pandemic which shifted many personal and professional aspirations, the appeal of mixed-use properties is also on the rise.
We’ve certainly noticed an uplift in enquiry levels around property types which incorporate both a commercial and residential element over the past couple of years. Especially from those property professionals who are looking to diversify elements within their portfolios to incorporate stronger yields, less volatile void periods and mitigate their risk exposure.
Through the introduction of ‘Solutions by Foundation’, we are now able to broaden our criteria to meet these ever-shifting needs. This allows us to offer our intermediary partners and their clients a finance route for those who have a real appetite to diversify, especially into areas such as more complex HMO buildings and mixed-use properties.
Looking ahead, a sluggish seasonal residential market may result in a widening of this transaction gap. Thankfully, the emergence of a highly innovative specialist lending market is on hand to deliver a range of responsible, accessible and competitive solutions to meet these rising non-residential and more specialist residential demands.
Grant Hendry is director of sales at Foundation Home Loans
