Buy-to-Let Investors Turn to Commercial Property
Buy-to-let investors are increasingly turning away from residential properties, with some reports stating that the number of those jumping ship to the commercial sector has recently tripled.
This shift has been spurred by two major upheavals in the market: last April, the former Chancellor of the Exchequer introduced an extra 3 per cent stamp duty for buy-to-let transactions and from April of this year a phased reduction in the amount of mortgage interest rate relief that buy-to-let landlords can claim is being introduced. Mooted proposals to close fiscal advantages related to purchasing buy-to-let properties via corporate vehicles have also acted to influence the sentiment of investors, directing them towards commercial property. Indeed, a commercial property partner at the auction house, Allsop, confirmed the point:
“We’re getting a lot of investors into our market because of the changes to buy-to-let.”
The commercial market is itself displaying signs of more lucrative returns and greater stability than residential properties in the buy-to-let sector, with investors likely to see higher rental yields and tenants typically signing up to longer leases. In addition to this, commercial tenants tend to take on numerous expenses that usually burden residential landlords; for example, commercial tenants are typically responsible for costs relating to insurance, repairs and business rates.
According to reports, the most popular asset types for these investors are retail units, small offices and mixed use properties, with one auction house stating that such properties are currently making up 80 per cent of their lots. This trend is likely to revitalise parades of dilapidated shops and small offices, as noted by a professional in the industry:
“Regeneration is not driven by tenants but by landlords … what we’ve got is George Osborne unknowingly regenerating the British high street”.