House flipping is at record highs. Why?
Flipping is back.
Buy, reno, sell, pocket the cash. It’s making a comeback.
Or is it?
Corelogic note that there’s been a boom in properties held for less than three years.
The next chart shows that in August, a record 16.0% of homes sold were purchased in the last three years, more than double the historical average of 7.9%:
Now, there’s probably a few things going on here.
Interest rates have gone up 400 basis points in very short order, so some of this is going to be distressed selling.
However, we’re not seeing huge evidence of this yet – and the banks have to report on impaired mortgages – so I don’t think the ‘forced selling’ impact is going to be huge.
There’s also probably a bit of regional backflow going on too.
One of the key drivers of the regional property boom during Covid was the exodus of city residents.
But with companies calling workers back into the office, that population flow is reversing.
Indeed, short-holds were much more common in the regions than in the capitals – 20% vs 13%.
But a good chunk of it does have to do with the ability for investors to take profits.
And with interest rates stabilising, and the outlook for prices clearer, house-flipping is becoming a less risky strategy.
And that’s why we’re seeing real estate agents say that there’s renewed demand from flipping investors:
“We’re seeing some buyers gravitate back towards those lower price point properties because they represent value relative to houses, so there’s quite a bit of energy in that segment,” he said.
This two-bedroom, one-bathroom apartment at 17D/50 Whaling Road, North Sydney, beat reserve by $412,000 amid rising demand for unrenovated properties.
Unrenovated properties which were previously shunned by buyers due to high construction costs are now highly sought after, as buying for a quick renovation and resale becomes more profitable, Mr McGlynn said.
“We’re seeing a resurgence in demand for unrenovated properties at the moment as more investors turn to flipping a property, rather than holding it over the long term,” he said.
“It’s becoming more common to see investors buying up those properties that need renovation, so they can do a quick fix and then flip them.
“With the market being so strong, it is favouring those that are looking to flip property, which is creating a lot of competition because owner-occupiers want them too.”
The apartment was sold for $2.427 million, which was $412,000 above reserve.
“The apartment had a great view of the Sydney Harbour Bridge, but it needed a complete overhaul. Generally in the last 12 to 18 months these type of properties would still sell, but they wouldn’t attract fierce competition,” Mr McGlynn said.
“This property broke the building record for a two-bedroom apartment, which is a really good example of the change in sentiment.”
So its going to be a little bit of everything.
But the key point here is that demand for unrenovated properties is heating up again.
Market certainty will do that.
JG.