Whatever the buy-to-let stamp duty changes mean for our industry, there are genuine alternatives for landlord investors
Well, that’s that, then. Possibly the biggest rush ever to complete residential investment property purchases by a given date, with absolutely no leeway given.
How was it for you? How do you envisage it affecting your business? Are you expecting fewer buy-to-let applications now that landlords have to find so much extra money on every purchase?
Let us have some good news: commercial investment property just got better. Yes, really. Not only are commercial investment properties not subject to the same stamp duty changes as residential but the revisions announced in the Budget to the structure of stamp duty land tax for commercial property appear to be both progressive and beneficial.
The new ‘sliced’ rates are illustrated in the table below. Our calculations suggest that, despite the higher rate at the top end of that table, commercial and mixed-use property purchased for less than £500,000 is now subject to lower stamp duty than was previously the case because of the way the rates are sliced above.
An example using HM Revenue and Customs’ own calculator is that a commercial property purchased for £300,000 previously would have attracted stamp duty of £9,000 but that figure has now reduced to just £4,500.
The savings on more expensive properties are less pronounced. We calculate a reduction of £500 in stamp duty on a £500,000 purchase.
What is more, for clients and introducers using professional commercial brokers with access to the whole market, there is a much wider choice and more competitive deals out there than many people appreciate.
For example, funding remains available to 75 per cent loan-to-value even on pure commercial investment property, in many cases even with relatively short occupational leases. The market for these types of application is bigger than for many years and growing all the time.
With more competition coming into the market, lenders do occasionally sharpen their pencils. Rates for pure commercial property investment assets are available as low as 2.5 per cent above Bank base rate, and even at 75 per cent LTV we have sourced funding this year at 3.5 per cent over Bank base rate for suitably robust applicants and property stock.
Commercial property is not restricted to investment, of course. The demand for ‘true’ commercial mortgages for trading business continues to be very strong, with cases placed at 80 per cent LTV and even higher at rates as low as 2.25 per cent over base rate, even for sectors outside the lender’s key markets, such as healthcare.
I suppose the message behind this article is that, whatever the buy-to-let stamp duty changes mean for our industry in the short, medium and long term, there are genuine alternatives for landlord investors to consider. By using appropriate professional commercial brokers, they can usually arrange good-quality and competitive funding once they have identified an opportunity.
Jane Simpson is managing director at TBMC