"The commercial property market continues to face significant headwinds, with higher operational costs, subdued occupier demand across various sectors, and more stringent lending conditions collectively restricting investment activity"
- Jonathan Samuels - Octane Capital
Residential property transactions are continuing to underpin overall market performance in 2025, with new analysis from Octane Capital showing stronger activity across the housing sector while commercial deals decline.
The specialist lender’s latest research reveals that non-residential property transaction volumes are down 5.5% across the UK so far this year, while residential transactions have risen 6.1% over the same period. The data highlights a clear divergence between the two markets, driven by differing financing conditions and investor sentiment.
Octane Capital examined the latest UK-wide property transaction figures, comparing average monthly activity across both sectors in 2025 with those recorded in 2024. The findings show that non-residential transactions are averaging 9,910 per month this year, compared with 10,488 in 2024, representing a 5.5% drop and indicating a renewed slowdown in commercial investment.
In contrast, residential transactions are averaging 97,458 per month in 2025, up from 91,868 last year, a 6.1% increase that demonstrates the resilience of the housing market.
While commercial activity rose by 5% in 2024 before easing again this year, residential volumes have not only recovered from 2023’s weaker levels but are now tracking higher than at any point since 2022. England has recorded the strongest increase in residential transactions, up 7%, followed by Wales at 5.6%.
According to Octane Capital, the widening gap between the two sectors reflects the different market pressures each faces. Higher borrowing costs, stricter credit criteria, and softer occupier demand have constrained commercial investment, while residential property has benefited from improving mortgage affordability and stable underlying demand for homes.
“The commercial property market continues to face significant headwinds, with higher operational costs, subdued occupier demand across various sectors, and more stringent lending conditions collectively restricting investment activity,” said Jonathan Samuels, CEO of Octane Capital. “These pressures are contributing to a projected weakening of commercial transaction volumes throughout 2025.”
“In stark contrast, the residential property market has shown a more resilient performance this year, with transaction levels trending upwards,” commented Samuels. “This positive shift is largely attributable to an improvement in buyer sentiment, which has been buoyed by a general downward trend in mortgage rates. The greater affordability and increased confidence have spurred activity, suggesting a divergence in the fortunes of the commercial and residential real estate sectors.”
Samuels noted that despite the improved momentum, the residential market is not without challenges. “While buyer sentiment has improved, ongoing economic uncertainties, stubborn levels of inflation, and the potential for future interest rate adjustments mean that it is not an entirely smooth ascent,” he explained.
He added that uncertainty ahead of the Autumn Budget is also influencing market behaviour. “As a result of these complexities, Octane Capital is observing consistent and robust demand for specialised financing solutions such as residential bridging and development finance,” Samuels said. “The ability to access flexible and timely funding remains crucial for those seeking to navigate the evolving landscape and take advantage of the opportunities available in the residential market.”
