A surge in demand for semi-commercial properties is expected to materialise as 2018 gets underway.
It has been reported that both commercial and semi-commercial properties are rising in popularity. Driven by the fallout of last year’s buy-to-let (BTL) mortgage tax relief amends, it’s also predicted that the trend will ‘drive prices higher as landlords diversify into these areas’.
What's behind the rise?
The reforms in the buy-to-let market in 2017 left portfolio landlords in the midst of unexpected extra costs and additional rules to abide by. From stamp duty changes, announced in the Autumn Budget 2017, to rental stress calculations, and from tax relief amends to added PRA rules, borrowers have a lot to deal with. This means, for many, that they need to alter their strategy to keep their cashflows stable.
What is a semi-commercial property?
A semi-commercial property is specifically one that's intended for mixed use. This includes a wide range of property types, including a shop with a flat above it, for example, or guesthouse or pub with separate residential accommodation above it.
The popularity of these kinds of semi-commercial properties is rising, not least because they offer the same benefits as those of a traditional, ‘full commercial’ property, such as being able to claim mortgage relief and having lower stamp duty costs.
Why is it becoming popular?
The increased demand in semi-commercial properties goes hand in hand with changes in the BTL market, as well as more generally across the industry landscape, in that it serves as an excellent way that existing portfolio landlords can comfortably invest without incurring further costs.
These kinds of portfolios retain the residential element that landlords are comfortable with. Equally, lenders, in turn, are comfortable working with these landlords, provided that the borrower has a record of successfully dealing with multiple BTL properties.
As above, semi-commercial properties are exempt – albeit on a proportionate basis – from the changes to mortgage interest relief, as are commercial properties. As such, commercial loan payments may still be offset against income in full before tax is calculated.
Discover more about Dukes Bailiffs Debt Recovery and how we can help landlords to maintain a stable cashflow here.