The UK rental market is extremely buoyant at present; rents and house prices are steadily increasing, with it being revealed just last week that the level of home ownership in the UK is now at its lowest level since 1986. Even with the existence of Government backed schemes such as Help to Buy it is very difficult, if not impossible, for a large proportion of people to be able to save enough money to cover the deposit and costs associated with buying a property.
We have already seen changes to the stamp duty system meaning that buy to let investors will inevitably find themselves paying a 3% premium over and above the rate that would be paid by an owner occupier. Additionally, over the next three years we are seeing the staged implementation of the reduction in tax relief available on residential buy to let property. These factors mean that in addition to increased capital outlay at the point of purchase, Landlords will also not be able to offset the cost of the interest on mortgage payments against tax, which will have a significant impact on the yield received.
At One 77 Mortgages we are not only able to deal in residential and buy to let mortgages, but also have team members who specialise in all forms of commercial mortgages and bridging finance. James Moulton, one of our commercial mortgage specialists, said “The changes described are having an impact, albeit a comparatively small one, on the residential buy to let sector. This combined with an element of economic uncertainty means that whilst residential property remains a sound investment, there are alternatives.”
Commercial or mixed-use investments, for instance, arguably offer far greater security in terms of longer leases and higher gross yields; typically 8% to 10%, sometimes higher, compared to the 5%, or at very best 6%, that are the norm on residential property. Moreover the stamp duty paid on commercial property is less than that on residential property, and the income generated on these, is subject to different tax rules.
If you would like to discuss commercial property as an investment or require assistance with please contact James Moulton on 01225 667187 or by emailing firstname.lastname@example.org. Whilst One 77 Mortgages are not able to provide tax advise directly to you, we are able to put you in touch with a reputable ‘partner’ firm who will be able to be of assistance.