Mixed-use property is a type of real estate property that combines commercial, residential and sometimes even industrial units. This allows investors to take advantage of different types of property in a single investment, and they have been growing in popularity in recent years.
If you are thinking of purchasing a mixed-use property, you would need a semi-commercial mortgage, also known as a mixed-use mortgage.
Examples of mixed-use properties are:
- Commercial units with flats
- Guest homes that are owner-occupied
- Pubs with self-contained accommodation
- Buildings with self-contained offices and flats
- Businesses run solely from home
The desirability of mixed-used properties have grown considerably due to changing criteria by consumers such as:
- Walkability: People prefer living in neighbourhoods within walking distance of nearby amenities. For example, millennials like to be able to walk to nearby restaurants and stores.
- Change in consumer behavior: As well as millennials, baby boomers have also traded in the suburban lifestyle for mixed-use properties.
- Rising demand for apartments: Apartments are high in demand and mixed-use properties provide a more practical use of space.
- Benefits to retailers: Mixed-use developments provide retailers with more foot traffic and greater access to customers than standalone stores.
Stamp Duty
A question we have been asked a lot when it comes to mixed-use properties is about the stamp duty element. How much you would pay and if there are any changes to be aware of.
Currently, transactions that are not exclusively in residential property suffer up to 12% less stamp duty. The mixed-use rule applies to the purchase of a single building with commercial use and residential use (eg. retail at ground level and flats above), as well as the purchase of a mixed portfolio of exclusively residential properties and exclusively commercial properties.
It also applies, though, to the purchase of a dwelling with land that is not ‘grounds’ of the dwelling, as well as the purchase of a dwelling with land that is not residential property regardless of its relationship with the dwelling.
Potential changes
The government is consulting on making changes to the stamp duty rules on mixed-use and multiple dwelling transactions. The proposed changes, which are significant, are unlikely to be introduced until autumn 2022.
They are considering replacing the hard-edged rule with an apportionment rule, such that a portion of the tax that would be due on the total price at the residential rates is added to a portion of the tax that would be due on the total price at the non-residential rates.
It is also consulting on making changes to multiple dwellings relief to prevent the relief being used on annexes. One option is to restrict the availability of the relief to dwellings purchased for a “qualifying business use” (such as trading, development and resale or investment).
Both sets of changes, if implemented, are likely to lead to the demise of a burgeoning reclaim industry, which is the primary target. The challenge is to ensure that the changes do not have unintended consequences.
The consultation gives an opportunity to minimise the effect of the changes on businesses.
If you are new to the property buying process and would like some help or advice get in touch. We are one of London’s leading bespoke real estate firms and would be delighted to help you acquire your dream property. Call direct on + 44 (0) 207 993 4081 or simply send an email for a fast response.
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