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Real Estate Investar Blog

Auckland house buyers making big bucks through 'flipping

Auckland property speculators are netting huge capital gains through buying and selling property in quick succession.

New figures from show that property investors are making an average capital gain of $1600 per day through a practice known as house flipping.

In the 18 months since January last year 1427 Auckland homes sold twice, 99 sold three times and eight sold four times.

What's even more staggering is that 112 properties were bought and sold within 2 weeks, showing just how active short-term speculators are in the hot Auckland housing market.

Repeated sales netted a total capital gain of $187.7 million, with nine properties selling with a capital gain of more than $1m.

The average capital gain for repeated sales in the period was $114,000 - a 19 per cent increase on the purchase price.

And 14 properties made more than 100 per cent in capital gains.

The average time between sales was 143 days, or just under 5 months.

However, in one case a two bedroom house on Te Atatu Peninsula with a 2014 CV of $350,000 was bought for $390,000 in July last year and sold one day later for $500,000. head of marketing Jeremy O'Hanlon said people were able to buy a property and sell it the next day by negotiating a settlement which gave them enough time to market the property and find a new buyer before even being handed the keys.

"It feels a little like stories from the gold rush of the 1860s," O'Hanlon said.

Last year new "bright-line legislation" was passed in Parliament to ensure property investors and speculators pay their fair share of tax.

The bright-line measures require income tax to be paid on any gains from residential property purchased on or after October 1, 2015 and sold within two years.

There are exceptions for an owner's main home, inherited property and the transfer of relationship property. figures show a 2296 square metre property on Northcote Rd, North Shore was bought in May 2015 and sold within two weeks for a $1m capital gain.

A three bedroom Manurewa home was bought four times for gains of $31,500, $98,500 and $45,000 between April and July 2015.

O'Hanlon said the vendors may have been either offloading a lemon or missing opportunities by selling too early.

"The opportunity to make $1600 a day is clearly tempting many to try their hand at property flipping.

"It's a high stakes game, which is easily forgotten when profits are hot."

Buyers should find out when a house was last sold and approach inspections with extra care if it was recently traded, he said.

"It's just tempting for a short term trader to maximise profits by making surface level improvements that don't stand the test of time."

Vendors should get an expert in to explore renovations options to maximise the sale value and reduce the chance for a house flipper to make an easy buck, he said.

Topics: Values / Prices

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