In the last two decades it has been a popular thing for property investors to purchase a property, renovate it and then sell it for a profit. You will know this as “flipping”. In recent years the amount of property flips has declined. This is according to a recent study by Hamptons International.
Back in 2004 the number of flipped properties in the UK stood at 60,340. In 2018 this number was just 18,630 which is a 69% reduction. There was a slight increase of 1.6% between the years of 2017 and 2018 but other than that it has steadily declined.
Flipping Definitely on a Downward Trend
Going back to 2004 the number of flipped properties by investors represented almost 5% of the total housing market for England and Wales. Since then there has been a gradual decline and the latest figure is only 2.1%.
If you take property values into consideration then last year (2018) saw £3.9 billion worth of property flipped. According to the Hamptons International research this is £0.2 billion less than in 2017. In 2004 the sector was worth more than double this amount at £8.2 billion. The value of properties flipped in London in 2018 was down to £0.6 billion.
Profit Potential is the reason for the Decline
It is now a lot more difficult for a property investor to make a substantial profit from flipping. In 2004 the average gain was around 32% and now this is down to 22% before costs such as tax. This is for properties in England and Wales.
Every region of England and Wales has seen a decline in flipping over the last few years. The biggest falls since 2004 occurred in London at 81% with the North West second with a fall in flipping of around 73%.
In 2017 the number of flipped properties in London was at 1.5% and this dropped down to 1.4% in 2018. The best region for flipping is the North East of England where flipped homes represented 3.6% of the total housing market in the region in 2018.
What about Flipping in 2019?
There were slightly encouraging signs for property investors that like to flip properties in 2018. Every region in England and Wales, with the exception of London, saw a slight increase in flips on the previous year. The North East was the best performer with a rise from 3.3% in 2017 to 3.6% in 2018.
The only bright spark for London last year was Hackney where 5.1% of properties were flipped. Other notable towns and cities are Burnley at 11.2%, Wolverhampton at 6.1% and Hyndburn (Lancashire) at 5.4%.
What does all of this tell you as a Property Investor?
When house prices are on the rise then property investors that flip properties tend to do really well. This is why in the period between 2000 and 2007 there was a lot of flipping in line with house price rises of around 13% a year.
But then came the financial crisis of 2008 and house price growth really slowed down so the same flipping opportunities didn’t exist. There have also been tax changes in the UK to make it even harder for flippers to make a profit. You can still make a decent profit flipping properties just not as much as was possible before.