Semi-commercial property is creating 30% higher returns to investors than ordinary buy-to-lets.
Semi-commercial property is defined as a residential property with less than 40% immediate family residential occupancy, and could be, for example, a shop mixed with a flat.
Semi-Commercial Property gets Higher Returns
Mortgages for Business have analysed the semi-commercial property market for the first time, and have said that last year, semi-commercial investments yielded 7.8%, whilst the normal buy-to-let yield was 6.1%.
Better returns of 7.8% were delivered by complex deals, with the best result from Houses in Multiple Occupation (HMO), which yielded 9.9%.
“We have broadened our analysis to cover freehold buildings where there is a small commercial element, but the greater part is residential,” says Mortgages for Business’ Managing Director, David Whittaker. “This is in response to demand from landlords whose portfolios are more diverse than the categories we have covered thus far.”
He adds: “We hope it generates greater debate for those many landlords being pressured to refinance by the Irish banks and, closer to home, RBS and LBG.”
There has been a rise of 48% since Quarter 1 (Q1) of 2011 in the general number of products on the market, which is higher than the 403 products available in Q2. The total number of buy-to-let mortgage products fell slightly, however, from 455 in Q3 to 442 in Q4. This reversed the positive trend of three quarters of consecutive growth.
The only new entrant to the lending market over the last quarter was Abbey for Intermediaries (Santander), which takes the total number of buy-to-let lenders to 25.
Whittaker continues: “The average number of products available has fallen marginally, but that’s more a reflection on an exceptionally strong third quarter than it is of a market slowdown.
“Buy-to-let is one of the few segments of the mortgage market that is really flourishing, and investors are still seeing strong returns.”1