The well-laid plans of buyers in the business of flipping houses are starting to come unstuck with many finding they have actually mistimed the market and are now dealing with substantial losses.
In the past two years, a buying frenzy throughout Sydney saw old houses ripe for restoration being purchased for inflated rates by property investors wishing to make high earnings after a quick makeover.
While this strategy does work in a hot market, house prices have now fallen 9.5% since they peaked in July 2017. Therefore, those who bought and renovated just as the market turned are now dealing with issues when they go to sell.
A good example of this is property in Newtown that cost $1.3 million in 2015 is now on the marketplace for $1.225 million regardless of being newly renovated.
Director at Ray White Surry Hills, Ercan Ersan, says, “Now is not the time to be flipping.”
“In 2015, there was a real fear of missing out. There was a sense the marketplace would keep going up and up, but, whether it’s shares, home, or cash itself, markets fluctuate.”
According to Mr Ersan, anyone who purchased between 2016 and 2017 and is now selling is doing it tough. They either have to accept the current market conditions or take a look at keeping that residential or commercial property for a minimum of the next three to five years.
Nonetheless, Mr Ersan adds that the existing market hadn’t stopped contractors, renovators and flippers trying to find excellent offers around Sydney.
Residential properties in Sydney’s south-west are the most likely to be flipped, with 3.2% of houses reselling within twelve months and 2.7% of units, according to CoreLogic information.
The change in the market may have caught some by surprise, however, the clever investor knows that they will always be out there. I wouldn’t be discouraged. Now is an ideal time that we’ve seen since 2012 for buyers to be out there, whether it’s investing, upsizing, or downsizing.
This article first appeared in afr.com.
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