Buy-to-let landlords are investing in commercial and semi-commercial property in an effort to beat the stamp duty rise.
A surcharge of three percentage points was introduced on April 1 and is payable on second homes and residential buy-to-let investments.
However, commercial and semi-commercial property is exempt from the surcharge, meaning that those who invest in these property types will have a lower tax bill.
In addition, falling commercial mortgage rates and new tax rules being introduced next year mean these properties look increasingly attractive.
The Chancellor, George Osborne, reformed the stamp duty regime for commercial property for most buyers in the Budget in March. Buyers are now charged a different rate for each band of the property's value instead of paying a flat rate. According to the Treasury, this will lower stamp duty bills for 90pc of buyers.
After the introduction of the second-home surcharge in April, a buyer of a £300,000 buy-to-let would pay £14,000 in stamp duty, while a buyer of a mixed-use property would pay just £4,500 - a saving of almost £10,000.
In addition, commercial yields are often significantly higher than residential yields. Experts say buyers can get as much as a 6pc yield on commercial property in London - double the average residential yield of 3pc in the capital.
As a result, investors are starting to turn to mixed-use and commercial options.
Research published earlier this week by Mortgages for Business, a broker, showed that a fifth of investors were now considering semi-commercial property – a figure that has more than doubled since November last year.
David Whittaker, the broker's managing director, said: “With higher yields it is no surprise that there has been a sizeable shift towards the more complex property types.
“The interest in commercial and semi-commercial property may also have grown because these asset classes do not incur the stamp duty surcharge imposed on residential property.”
While straightforward commercial property might present an intimidating prospect for the casual investor, semi-commercial investments, such as a shop with a flat above, or a pub that has been converted into a shop and flats, represent a good middle ground, said Shaun Church, a director of Private Finance, another broker.
"The flat above the shop is the best approach for an amateur. Depending on the type of tenant in the shop, it’s a nice halfway house between commercial and residential investment," he said.
"You've got two different types of property, so it’s an easy way for someone to diversify and reduce their risk – and stamp duty on commercial property is now looking quite attractive."
Once bought, Mr Church suggested that buyers might even consider changing the use of their property in order to maximise the value of their investment.
"Because it's cheaper to buy commercial property, a buyer could look at getting planning permission to convert a building from commercial back to residential.
"The square foot value is more attractive if it’s residential, so you could make a profit on sale. However, you would have to get the planing permission, which would not be guaranteed," he said.
'New stamp duty rules make our flat a better investment'
Faye Grout, 40, a teacher, realised that the new stamp duty regime meant buyers of her mixed-use flat and shop building in Aylesbury, Bucks, not only would be exempt from the higher rate but would actually have a lower tax bill after the Budget announcement.
The building, which has been in her family for three generations, used to be a saddler selling leather goods, which was owned and run by her grandfather.
When the shop closed 15 years ago the family rented it out, first to a hairdresser and then to a coffee shop owner. It also has a two-bed flat, which could be rented out separately.
Now the family want to sell. They used to own a similar property next door, which has already been sold. That sale is what made Ms Grout realise that both properties were exempt from the higher rate.
She said: “The buyers for the shop next door were very keen to complete before the stamp duty changes, but then I realised that they weren’t going to lose out under the new rules - in fact they would pay £1,500 less.”
The second property, which has not yet been sold, is worth £340,000 - and Ms Grout said she thought a buyer could make £25,000 a year in rent on the shop and flat, which would be a 7pc yield.
Will it get even cheaper?
One consideration that may have put off potential investors in the past is the typically higher interest rate on commercial mortgages .
Individuals who buy a commercial property must get a commercial mortgage, and rates tend to be higher than on an ordinary buy-to-let mortgages . Mr Whittaker estimated that a typical rate would currently be around 3.5pc.
It's also harder to get an interest-only mortgage on a commercial property than on a buy-to-let property. For mixed-use properties capital repayment loans are more common.
But experts say commercial mortgage rates are coming down and predict that more mainstream providers will begin to offer commercial mortgages as landlords consider incorporating to avoid the higher tax on buy-to-let income being introduced in April next year.
The new regime means that landlords who are higher-rate taxpayers will be unable to deduct their mortgage interest from their rental income before calculating their tax bill. This has led many experts to advise landlords to consider setting up a limited company, as businesses are exempt from the higher rate of tax and pay much lower corporation taxes instead.
Individual landlords who buy mixed-use properties can continue to claim mortgage interest relief after the new regime is introduced, making these investments an even more attractive prospect in future, said Mr Whittaker.
“You will still be able to offset your interest even in 2020 [when the new tax regime takes full effect]. At the moment you pay a little bit more on the mortgage, but banks are already indicating that their rates on mixed-use property will come down," he said.
"You're getting a much, much better yield. It’s not yet a cavalry charge towards the high street but we are starting to see a movement that way."