New research carried out by OneSavingsBank suggests that an increasing number of British buy-to-let investors are turning towards commercial property in a bid to diversify their portfolios.
In recent months, the Prudential Regulation Authority has introduced a raft of changes to mortgage stress tests which make it more difficult for landlords who own a large number of buy-to-let residential properties to take on new mortgages.
In response to the new rules, which come in the wake of other punitive changes affecting mortgage interest tax relief and Stamp Duty Land Tax (SDLT), landlords are increasingly enquiring about commercial properties in a bid to diversify their investments and increase their returns, new research suggests.
According to OneSavingsBank’s report, some 56 per cent of brokers have been approached by landlords who wish to diversify their existing property portfolio of late, while a further 15 per cent have received an influx of enquiries from landlords specifically interested in adding more commercial properties to their portfolios.
Commentators have been keen to note that landlords who hold only commercial properties within their portfolio will not be affected to the reforms to mortgage interest tax relief, which, between now and 2020, will slowly reduce residential landlords’ ability to offset mortgage interest payments against their rental income over the next few years.
In 2018, landlords can offset 50 per cent – but this will be reduced to 25 per cent in 2019 and then again to zero in 2020.
Adrian Moloney, Sales Director at OneSavingsBank, said that wise investors were “on the hunt for greater yields in the face of regulatory and tax changes” and were therefore “diversifying into commercial property.”
He added that the buy-to-let market was growing “increasingly complex” – a trend which is likely to continue into the foreseeable future.