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Category: March – April 2021
Property flipping hits a 12-year high

Property flipping hits a 12-year high

It was the 2008 recession that didn’t so much as put the nail in the coffin for house flipping, but hammered the lid down. As quickly as she’d arrived, house flipper extraordinaire Sarah Beeney exited our screens, leaving us grateful for the fact we still had a roof over our own heads.

But more than a decade later – and notwithstanding a global pandemic – house flipping has fought its way back as a way for property investors to make money. Upmarket estate agent Hamptons International reported that 2020 was set to be a record year for flipping – perhaps reinforced by the not-so-little matter of a brand new TV show with the working title Flipping Fast, which has recently been commissioned by Channel 4. The format follows six contestants – all budding property developers – who are given £100,000 each to buy, refurbish and sell. At the end of a year the individual who’s made the most money is crowned the winner.

Perhaps this new show serves as a good measure of the perceived value in this property investment strategy – a perception certainly reinforced by recent data.

The top spots for flipping

According to Hamptons International, the most successful areas for flipping in terms of numbers of properties flipped are the northeast and the northwest. Their data (gleaned from the Office of National Statistics) revealed that Burnley was the top property-flipping location in Britain; one in 12 houses purchased were sold again within a year. Local developers won’t be too surprised to hear that though – it’s the sixth year running that Burnley has hit the top spot. The next most popular flipping location last year was County Durham, followed by the Midlands.

In terms of profit, however, Rutland in the Midlands tops the chart with an impressive average price increase of £45,269 on flipped properties. Despite being high on the chart in terms of the number of properties flipped, Teesside and County Durham came in with much lower increases in sale price with an average uplift of just £6,100 in Middlesbrough. However, it’s worth considering these uplifts within the context of the overall local market values of the average property so perhaps it’s not as disappointing as it first appears.

The top 10 local authorities with highest proportions of homes flipped during 2020
The top 10 local authorities with highest proportions of homes flipped during 2020
Source: Land Registry and Hamptons International

One in 40 properties flipped nationally in 2020

Looking at the flipping figures nationally, approximately one in 40 properties purchased were flipped last year. Around 23,000 homes were flipped in 2020 – a 12-year record, and a figure well above the 20,857 across 2019. And there is another big difference between 2020 and 2019, too: profit. Developers made an average of £40,995 profit last year, compared with £29,685 the previous year.

The more dilapidated the property, the less competition

In Burnley, 51 properties were flipped with an average £20,643 between the original cost of the property and its new sale price. The vast majority of property purchased in the town was terraced housing selling for around £40,000, and most of these properties were run down.

In fact, the more run-down and dilapidated the property, the higher the potential profit, according to long-in-the-tooth property flippers. That’s because there is less competition for the property in the first place, and there is the potential to add so much more value.

Another tip is for amateur property developers to aim for a minimum profit of at least £20,000 – any less than that and it’s hardly worth getting involved in the first place.

The future of flipping

The big question, of course, is whether this upward trend will continue across 2021 when so many experts are predicting a dip in the property market as a whole. Will this speculation have an impact on the confidence of investors and could it lead to a decrease in profits on flipped properties? All this remains to be seen.

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A round-up of COVID-19 and the property market in 2021 so far

Further alterations and extensions to government policies are expected as Covid-19 continues to take its toll on the property industry.

Help to Buy

Help to Buy is the latest scheme to be extended beyond its original deadline. The first-time buyer financial help scheme, where the government pays some of the deposit on a new property, was due to end in March, but has now been extended to May.

The reason for the extension, according to the government, was because 16,000 sales had been affected owing to construction delays caused by the various lockdowns. Around 278,000 properties have been purchased using the scheme over the past seven years.

Landlords further worried over “No Evictions” extension

Not a scheme, but a policy brought in as a response to lockdown, the “No Evictions” rule for private rented tenants has also been extended until the end of March. It was supposed to end mid-Feb.

The National Residential Landlords Association (NRLA) say there are around 800,000 private renters currently in arrears. A spokesman for the organisation insisted that continually extending the deadline was leading to “mounting debts to the point [renters] have no hope of paying them off”. He called for hardship loans and grants to be extended to landlords to help them cope with their own financial crises as a result.

Tenants also joining “race for space” to rural locations

But not all landlords are suffering as a result of Covid-19 – some are actually benefiting, especially those whose properties lie in more rural locations. For just like buyers, renters too are now looking for bigger gardens and more rooms. The cost of rent is actually falling in built-up areas and rising in countryside locations.

Property portal Zoopla noted that rental prices in upmarket areas such as the City of London and Kensington and Chelsea plummeted 17.3% and 12.3% respectively in 2020 compared with 2019. Similarly, in Greater London, they were down 8.3%. Edinburgh and Manchester experienced similar drops. In Birmingham, tenants are now paying 3.4% less, while in neighbouring Wolverhampton, Sandwell and Bromsgrove they are prepared to pay 5.3% more to live in quieter, greener environments.

Tenants’ property preferences have also changed as a result of lockdown: houses are now in far greater demand than apartments. London landlords saw their apartments take 20% longer to rent compared with houses in the closing months of 2020. The latter were snapped up 10% more quickly than the same time the previous year and 30% faster across the UK as a whole.

Property prices take a dip

Predictably property prices fell in January as many buyers realised their transaction wasn’t going to go through in time to meet the Stamp Duty deadline in March. Both Nationwide and Halifax reported a 0.3% monthly drop in January compared with the previous month. The last recorded drop had been back at the beginning of the first lockdown.

In terms of year-on-year comparisons, Halifax says prices are up 6.4%. However, that figure is expected to drop as the latest Royal Institution of Chartered Surveyors (RICS) survey shows more than a quarter of their members revealed a drop in buyer enquiries during the first month of the year. This is coupled with more than a third of surveyors reporting fewer properties coming on to the market – the first fall since May last year.

Property portal Rightmove also noted a drop in interested buyers and properties coming on the market in January, but said the figures had started to pick up in February, with a 45% rise overall when compared with the same period last year. Purchases were also up 5% year-on-year. They attributed the current lack of properties in part down to the increased number of families having to spend time home schooling.

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