Specialist lender SDKA has increased its loan-to-value (LTV) ratio on semi-commercial properties to 75%, responding to a surge in interest from developers capitalising on differences in Stamp Duty Land Tax (SDLT) rates.
The change comes as more property professionals explore opportunities to convert semi-commercial buildings into fully residential units, using permitted development rights to do so while benefiting from lower SDLT rates at the point of purchase.
Current rules, which came into effect on 1 April 2025, mean buyers of semi-commercial properties pay significantly less in stamp duty than those acquiring purely residential assets. For example, a £200,000 residential property attracts an SDLT charge of £11,500, whereas a semi-commercial building purchased for the same amount would incur a payment of just £1,000.
At the £500,000 mark, the difference becomes even more pronounced. A residential acquisition would result in a £40,000 SDLT bill, compared with £14,500 for a semi-commercial property, a gap of £25,500.
Developers are increasingly using this differential to their advantage by purchasing mixed-use properties and converting the commercial space into additional residential units, effectively boosting rental income or resale value from the same asset.
The LTV increase is aimed at helping developers secure more financing upfront, while the lower SDLT costs offer a significant incentive to pursue mixed-use acquisitions. With many landlords and developers re-evaluating strategies in light of new taxation and planning policy changes, lenders are adjusting terms to keep pace with market demand.
“The numbers are compelling to developers as SDLT savings can go a long way to, if not cover all, the associated costs of converting a semi-commercial asset into a fully residential offering which can increase income streams and asset value,” said Scot Tsang (pictured), head of operations and in-house legal at SDKA.
“By enhancing our lending criteria for semi-commercial properties to 75% LTV, an increase of 5%, we are ultimately providing greater flexibility and higher lending potential for every property professional and making semi-commercial properties an even more attractive investment.”
