From watching a rundown property transform into a beautiful house, to seeing prices and profits go through the roof, property flipping has a way of making people believe in magic! However, over the past 10 years, property flipping has copped some flak for its contribution to New Zealand’s housing crisis. As shown in a recent Corelogic study, property flipping as a business venture isn’t as popular as it once was. So, could this be the time to jump in headfirst?
You’d think lots of people would be shooting their shot at the property flipping game, but the numbers show otherwise. According to the study, the percentage of properties resold after being held for a year has dropped from 3.8 per cent in 2016 to 2.1 per cent in the first quarter of this year. Even in Auckland, where property flipping has been fashionable for the past 20 years, the venture has dropped from 6.6 per cent of resales in 2016 to just 1.7 per cent this year.
All fingers point to the bright line test, which taxes profits from investment property sales within a certain timeframe. The capital gains tax change from 2–5 to 5–10 years has no doubt deterred many property flippers despite skyrocketing house prices over the last year. It’s difficult to imagine whether the gain would still be worth it after combining expenses with a hefty capital gains tax bill.
Many investors have shifted their focus from two-bedroom units (that are typically good for rentals) to three- or four-bedroom homes that are more suited to owner-occupiers. From investors looking for rental properties, we are starting to see an upward trend in owner-occupiers and first-home buyers.
That said, it could still be a win-win, whether you choose to rent out or sell your investment property. With fewer flipped houses and rental stock, rental prices are set to remain steady or even increase further in certain areas. And with the higher costs that come with renovating larger homes (not to mention the shortage of building supplies and tradies), resale prices are expected to increase as well.
Changes to healthy home standards and the bright line test have kept property traders on their toes, but investors, even the “mum and dad” ones, just need to make strategic adjustments to keep their property flipping businesses afloat. Having an experienced and skilled team is almost a must, in order to successfully flip a property.
Data shows an average of $120,000 of gain in short-hold resales, so clearly, there are still some serious potential profits to be made. Not a bad way to make a quick buck, is it?
Flipping may have gotten such a bad rap that professional and part-time traders are turning to property development and repurposing, but we can’t deny there will always be a demand for flipped properties (and just properties in general). With the dwindling supply of flippers, there could still be untapped opportunities for you to explore.
Interested in property flipping or property development in general? If you have any questions, no need to think twice—just give us a buzz! You can also flick us an email message or tee up a time here so we can gettogether and answer all the FAQs!
Your Outside Team
Mail: PO Box 24-457, Wellington 6142
Phone: 04 889 2975