BLOGS

Introduction

The UK housing market is navigating choppy waters. With mortgage rates holding stubbornly above 5% for much of the past year, buyer affordability has taken a significant hit, translating directly into falling transaction volumes across England, Wales and Scotland.

REalyse data shows residential sales have dropped markedly compared to the previous 12-month period, with some property types and regions experiencing declines well above the headline 6.7% figure. Yet the picture is nuanced: while fewer homes are changing hands, those that do sell are achieving prices close to asking, and time on market has actually improved in many areas.

Transaction volumes: a market in retreat

The numbers paint a clear picture of reduced activity. Across England, transaction volumes have fallen between 40% and 49% year-on-year depending on property type. Flats have been hit hardest, with sales down nearly 49%, whilst terraced homes have proved more resilient with a 40.6% decline.

Wales shows a similar pattern, with sales volumes down 36% to 41% across property types. Terraced properties again demonstrate relative strength, falling 36.1% compared to 41.4% for flats.

The impact has been felt across the price spectrum. Detached homes in England, averaging around £522,000, have seen transactions fall 48%, whilst more affordable semi-detached properties averaging £322,000 are down 44%.

The affordability squeeze

The root cause is straightforward: higher borrowing costs. With the Bank of England base rate elevated and average two-year fixed mortgage rates holding above 5%, monthly payments have increased substantially for the same loan amount.

For a typical first-time buyer looking at a £300,000 property with a 10% deposit, the difference between a 2% and a 5.5% mortgage rate translates to roughly £500 more per month in repayments. This arithmetic has pushed many would-be buyers to the sidelines, particularly in higher-value markets where the absolute cost difference is even more pronounced.

REalyse data indicates that flats—often the entry point for first-time buyers—have experienced the steepest transaction declines. This suggests that affordability constraints are disproportionately affecting those at the start of the property ladder, where stretched borrowing is most common.

Prices holding despite volume decline

Perhaps surprisingly, achieved prices have remained relatively stable despite the transaction slump. Annual price changes range from modest declines of around 3-4% for terraced properties in England to slight gains of 1-2% in parts of Wales.

The average discount from asking price to sold price sits close to zero across most regions, with some areas even seeing properties achieve above asking price. This challenges the narrative of widespread overvaluation leading to distressed sales.

What we're observing is a market adjustment primarily through volume rather than price. Sellers who need to transact are meeting realistic buyer expectations, whilst those who cannot achieve their price are simply withdrawing from the market.

Days on market: a positive signal

Interestingly, the time taken to sell has actually decreased compared to the prior year. Average days on market has fallen by 6 to 26 days across different regions and property types.

This seemingly counterintuitive data point suggests that motivated buyers are acting decisively when they find suitable properties. The pool of active buyers may be smaller, but those remaining are committed and ready to proceed. Properties priced correctly are finding buyers relatively quickly.

For agents and vendors, the implication is clear: accurate pricing from the outset is more critical than ever. Overpriced listings risk sitting on the market whilst realistically priced homes move efficiently.

Regional variations and opportunities

The data reveals meaningful regional divergence. Wales has shown relatively greater resilience, with smaller transaction declines and modest price growth in some property types. Terraced homes in Wales have seen prices rise 1.7% year-on-year despite the challenging environment.

For investors and developers, these variations create opportunities. Areas with robust local employment, limited housing supply and relatively affordable price points may outperform national trends. REalyse market intelligence can help identify such pockets of resilience through granular analysis of transaction patterns, rental yields and demographic indicators.

Outlook: waiting for the turn

The market now appears in a holding pattern. Sellers with flexibility are waiting for conditions to improve, whilst buyers are proceeding only when circumstances are compelling—whether through necessity, opportunity or sufficient financial cushion to absorb current rates.

The path forward depends heavily on monetary policy. Any sustained reduction in interest rates would likely release pent-up demand quickly, given underlying housing need remains strong. However, with inflation proving sticky, the timing of meaningful rate cuts remains uncertain.

For now, the UK housing market is adjusting to a new reality of higher borrowing costs. Transaction volumes reflect this recalibration, even as achieved prices demonstrate that fundamental demand for property remains intact when pricing is realistic.