Semi-commercial property giving 30% higher returns

Friday 13th January 2012

Semi-commercial property – for example, shops mixed with flats – is giving 30% higher returns to investors than ‘vanilla’ or routine buy-to-let.

Mortgages for Business, analysing semi-commercial property for the first time, says that semi-commercial investments yielded 7.8% last year, whilst ordinary buy-to-let yield was typically 6.1%.

Complex deals provided better returns at 7.8%, with Houses in Multiple Occupation doing best of all, yielding 9.9%.
 
David Whittaker, managing director at Mortgages for Business, said: “We have broadened our analysis to cover freehold buildings where there is a small commercial element but the greater part is residential.

“This is in response to demand from landlords whose portfolios are more diverse than the categories we have covered thus far.

“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.”
 
In general the number of products on the market has risen by 48% since Q1 of 2011, and is also higher than the 403 products available in Q2. However, the total number of buy-to-let mortgage products fell slightly from 455 in Q3 to 442 in Q4, reversing the positive trend of three consecutive quarters of growth.
 
Abbey for Intermediaries (Santander) was the only new entrant to the lending market over the last three months, taking the total number of BTL lenders to 25.
 
Whittaker said: “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.”