Commercial property overtaking residential lettings

15 March 2005
A report in the Financial Times claims that an increasing number of private investors is moving away from the residential lettings market and choosing commercial property.

According to the newspaper, a recent decrease in revenue from residential lettings, together with generous tax breaks and the possibility of higher rents from commercial entities, is tempting investors to choose commercial property over residential.

"Although some areas of commercial property have become overvalued there is still potential for high returns, and yields on some commercial property can be as high as 10 per cent," said David Whittaker, a broker at Mortgages for Business.

Mr Whittaker also indicated that there were signs that "the traditional buy-to-let market has passed its peak."

The newspaper's report uses Investment Property Databank figures to claim that commercial property returned 18.3 per cent in 2004, significantly more than the residential market as commercial property margins are tied more closely to business performance rather than the housing market.

Tax relief - including tax breaks for converting parts of commercial properties into flats, and lower capital gains tax on profits from commercial sales - are also a major incentive in the increasing popularity of commercial property, the newspaper reports.

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