Over half of mortgage brokers say they have been approached by buy to let investors seeking to diversify their portfolios within the last six months, according to OneSavings Bank.
Of those brokers who had been approached by landlords about diversifying, 56 per cent of enquiries were about diversifying into Houses with Multiple Occupants in search of higher yields.
Research by Mortgages for Business has found that the average yield of a HMO could be 3.3 per cent higher than a property with a single tenancy agreement. However, changes to HMO regulations following a government consultation, due to be implemented from October, could introduce additional regulation in this area.
Landlords are also increasingly diversifying into commercial and semi-commercial properties in the wake of recent Prudential Regulation Authority regulations and changes to tax measures on buy to let properties.
OneSavings Bank research found 14 per cent of brokers said they had been approached by landlords wanting to increase the level of commercial property within their portfolio.
In addition, nine per cent reported that landlords wanted to diversify into mixed-use properties.
Unlike residential buy to let property, landlords holding only commercial property will not be affected by the reforms to mortgage tax relief. In addition, commercial or mixed-use properties will not incur the same amount of stamp duty as purely residential buy to let properties.
Six per cent of brokers said landlords were looking to diversify into student accommodation. Brokers also pointed to other options such as holiday lets and serviced accommodation, being brought up by clients.
Recent regulatory and tax changes are thought to be the driving force behind a growing number of landlords moving into new property markets.
“Landlords are on the hunt for greater yields, and, in the face of regulatory and tax changes, diversifying into commercial property or more complex residential options such as HMOs can offer this” says Adrian Moloney, sales director at the bank.
“With the buy to let market becoming increasingly complex, there is an opportunity for informed brokers to support landlords seeking new niches. However, these brokers must in turn be supported by specialist lenders who can offer the flexible lending needed to finance the growth of these segments of the market” he says.
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Good to see that government policy is driving housing providers away from providing homes and towards providing commercial units, which there is less demand for because of technology (people can't live in an online house but can work in an online office), and towards holiday homes which I understand that overnment frowns on as it restricts housing for people to live in.
I must get into politics. I can make a lot more mistakes there and get away with it than I can providing homes for people!
Greater yields = higher risks. Even in a good market, a rental void on a commercial property can be very lengthy and costly.
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